A weak open on Wall Street as Italy's rates soar

CHRISTINA REXRODE AP Business Writer Published:

NEW YORK (AP) -- U.S. stocks opened lower Wednesday as more ominous signs emerged about the debt maelstrom in Europe.

The Dow Jones industrial average fell 66 points, or 0.5 percent, to 12,509 in early trading. Caterpillar, 3M and Home Depot had the biggest losses among the 30 stocks in the Dow.

The Standard & Poor's 500 index fell 7 points, or 0.6 percent, to 1,317. The Nasdaq composite fell 17 points, or 0.6 percent, to 2,826.

The U.S. market still hasn't decided how to react to the bailout of Spanish banks, which was announced over the weekend. The bailout was meant to soothe markets, but U.S. stocks plunged anyway on Monday. The market rallied on Tuesday, but that was less about Europe and more about a Federal Reserve leader hinting that the Fed could pump more money into the ailing U.S. economy.

Key details have yet to be worked out, including how European leaders will come up with the $125 billion they say they can lend, and how Spain could pay the money back.

Spain's 10-year borrowing rate inched up to 6.69 percent from Tuesday's 6.67 percent. When the interest rate rises, it means the government is being forced to pay more to persuade investors to buy its bonds; other countries have been forced to seek bailouts when their borrowing rates hit 7 percent.

The newest point of worry for investors was Italy, which some fear could be the next domino to fall in Europe's government debt crisis. The country's 10-year borrowing rate rose to 6.12 percent from 5.94 percent the day before.

In another unnerving sign, Italy held a sale of 12-month bonds, a warm-up for Thursday's weightier long-term debt auction, and had to pay interest of 3.972 percent, up sharply from 2.34 percent last month. That's a sign that investors' confidence in country's finances is slipping.

The interest rate on the U.S. 10-year Treasury note fell to 1.63 from 1.66 percent. That means investors are plowing money into one of the few places where they think it will be safe, with the U.S. government.

The losses on the stock market were broad. Of the 10 industry groups in the S&P 500 index, only one rose, health care. Those stocks are usually considered relatively safe places to park money since they pay big dividends and are less vulnerable to swings in the economy. Materials, industrial and energy stocks, which depend heavily on economic growth, fell the most.

Some of the companies moving in early trading:

-- Computer maker Dell jumped 52 cents, nearly 4 percent, to $12.49, a day after announcing that it plans to pay its first stock dividend. It was the biggest gain of any stock in the S&P 500 index.

-- JPMorgan Chase rose nearly 1 percent in early trading, before CEO Jamie Dimon's testimony to Congress over the bank's surprise trading loss. It was up 13 cents, or 0.4 percent, just before testimony began.

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