Markets falter after unrest in Greece

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Trader Todd Ingrili, works on the floor of the New York Stock Exchange Wednesday, June 15, 2011.

Photo Credit: The Associated Press

NEW YORK — Unrest in Greece rattled global financial markets Wednesday. Stocks fell the most since June 1 as investors piled into lower-risk assets like the dollar and U.S. government bonds.

A report on manufacturing in the New York area also came in far below forecasts. That reignited fears that factory production, one of the few bright spots in the U.S. economy, may be weaker than many economists had believed.

Thousands of people gathered on the streets of Athens to protest government cutbacks required by international lenders. Demonstrators hurled rocks at riot police, who responded with tear gas. Greece’s prime minister said he would name a new Cabinet after talks to form a new government with opposition parties failed.

The Dow Jones industrial average fell 178.84 points, or 1.5 percent, to close at 11,897.27. The drop erased all of its 123-point gain from Tuesday and put the average on track for a seventh straight week of losses. All 30 companies in the Dow dropped, led by Aluminum maker Alcoa Inc. which lost 2.9 percent.

If Greece defaults on its debt it could cause investors to dump the bonds of other weak European nations like Portugal, Spain and Ireland, raising borrowing costs for those countries. It could also cause the dollar to further strengthen against the euro, making U.S. products more expensive abroad. That acts as a drag on corporate profits. Earlier in the year a declining dollar played a key role in boosting corporate earnings and sending
stocks higher.

June is shaping up to be the worst month for the stock market since May 2010. Stocks have risen only three days this month and have fallen 11. The Dow Jones industrial average and the Standard & Poor’s 500 index are now 7 percent below the highs they reached in late April.

Five shares fell for every one that rose on the New York Stock Exchange. Despite the sell-off, consolidated trading was only slightly heavier than usual at 4.2 billion shares.