Markets swoon as anxiety about Europe takes hold

NEW YORK (AP) ? The threat of a financial crisis spreading from Europe shook markets on Wednesday. The euro dropped to a nearly two-year low against the dollar. Oil prices sank to their lowest this year, and stocks took another fall.

The Dow Jones industrial average fell 180 points to 12,322 shortly after noon Eastern. The Dow has lost 6.7 percent this month, nearly wiping away all its gains for the year. Energy, banks and technology stocks fell the most.

In Brussels, leaders of the 27 countries that make up the European Union met to discuss ways to keep the debt crisis in Europe from getting worse, including proposals to promote jobs and growth.

Analysts are turning increasingly skeptical that European leaders will succeed at preventing Greece from dropping the euro or agree on ways to jump-start the region's economy. The Organization for Economic Cooperation and Development warned Tuesday that the 17 countries that use the euro risk falling into a "severe recession."

Germany's DAX and France's CAC-40 closed more than 2 percent lower. The euro continued falling against the dollar, reaching $1.25, its lowest level since July 2010. Concerns about the stability of the European currency union if Greece leaves have knocked 5 percent off the euro this month. Yields on German government bunds fell as money shifted into low-risk investments.

If Greece exits, it could spread havoc throughout the global financial system. Bond traders may turn on other struggling governments in Spain and Italy. One big fear is that people in Spain and Italy will start a bank run, pulling euros out of banks for fear that their countries will soon follow Greece's lead. European banks have close ties to U.S. banks.

In other trading, the Standard & Poor's 500 index fell 19 points at 1,297. The Nasdaq composite index slumped 42 points to 2,796.

Benchmark crude lost $1.50 to $90.37 in New York. It fell as low as $90.18 earlier in the day. Prices haven't been below $90 since Nov. 1.

The dollar rose and yields on U.S. government debt fell as traders shifted money into the protection of Treasurys. The yield on the 10-year note sank to 1.71 percent, close to a record low, from 1.77 percent late Tuesday.

The dollar and Treasurys often trade in tandem when anxiety hits markets. Traders from around the world sell foreign assets and then need to buy dollars before buying dollar-denominated U.S. Treasurys.

Facebook climbed 3 percent to $32.10, its first gain after two tumultuous days. The stock is still well below the $38 price for its initial public offering last week.

Worries about Europe overshadowed encouraging news from the U.S. housing market.

The Commerce Department said sales of new homes rose solidly last month, adding to evidence of gradual improvement in the housing market. Americans bought 3.3 percent more homes in April, led by strong gains in Midwest and West.

Europe's struggles come at a time when Asia is also slowing. China's economic growth fell to a nearly three-year low of 8.1 percent in the first quarter and factory output in April grew at its slowest pace since the 2008 crisis, raising the threat of job losses and possible political tensions.

Other stocks making big moves included:

? Dell fell 17 percent. The computer maker reported disappointing first-quarter results after the market closed Tuesday and predicted weak sales for its second quarter. Quarterly profit fell 33 percent on lower sales to big businesses, consumers and the public sector.

? Ford Motor rose 1 percent, a day after the company won back its blue oval logo, factories and other assets that were pledged as collateral for a massive loan taken out last decade.

? Guess Inc. rose 4 percent after its first-quarter results beat Wall Street's expectations, and an analyst recommended that investors buy the stock.

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