NEW YORK (AP) ? The Dow Jones industrial average lost more than 240 points in early trading after Italy’s borrowing costs soared.
The yield on the benchmark Italian government bond spiked above 7 percent, a sign that investors are losing faith in the country’s ability to repay its debt. Analysts say Italy will not be able to refinance its debt at current rates, which will force it to either enact deep austerity measures or to receive financial assistance to prevent a default.
Greece, Portugal and Ireland required bailouts when their bond yields rose above 7 percent. But unlike those countries, Italy’s $2.6 trillion in debt is too large for other European nations to bail out.
Europe’s debt crisis continued in Greece as well. The country’s two main political parties are still engaged in power-sharing negotiations and have yet to name a prime minister to lead the interim government. The new government must pass an austerity package to receive the next loan installment of emergency loans. Without the funds, Greece could default before Christmas.
Markets fear that a chaotic default by either Greece or Italy would lead to huge losses for European banks. That, in turn, could cause a global lending freeze that might escalate into another credit crisis similar to the one in 2008 after Lehman Brothers fell.
The Dow was down 242 points, or 2 percent, to 11,928 ten minutes after the market opened. The S&P 500 lost 29, or 2.3 percent, to 1,246. The Nasdaq composite slid 64, or 2.4 percent, to 2,663.
In corporate news, General Motors Co. lost 7.7 percent after the company said Europe’s economic woes were weighing on its profits.
The Wendy’s Co. dropped 3.4 percent after the company said higher beef prices contributed to a larger third-quarter loss.
Dean Foods fell 1.9 percent after the company took a write-down in its fresh dairy business.