- Associated Press - Wednesday, April 4, 2012

NEW YORK (AP) — Wall Street on Wednesday suffered its worst loss in a month after a weak bond auction in Spain caused fears about Europe’s debt problems to flare up again. Gold plunged to its lowest level since January.

The Dow Jones industrial average was down 137 points at 13,062 as of 2:30 p.m. EDT. Just three of the 30 stocks in the average rose. The Dow has fallen more than 100 points only day this year, March 6, when it lost 204 points.

The Standard & Poor’s 500 index was down 16 points at 1,397. All 10 industry groups in the S&P 500 index fell, led by technology.

The Nasdaq composite index was down 52 at 3,061, on the way to its worst decline of the year. The Nasdaq rallied almost 20 percent in the first three months of the year but was headed for its sixth loss in seven days.

Investors looking for safe places to park money drove prices for U.S. government debt higher. The dollar surged against the euro.

The selloff was caused by a disappointing auction of government debt in Spain. Bond yields there shot higher, a signal that investor confidence in Spain’s finances is weakening. Spain announced tax increases and budget cuts last week.

“European countries face a lot of tough choices, and investors are watching the situation there carefully,” said John Manley, chief equity strategist for Wells Fargo Advantage Funds. “It’s like when cockroaches appear: You’re never quite sure how many are out there.”

European stocks plunged. Benchmark indexes in Germany and France fell 2.8 percent and 2.7 percent, respectively; Britain’s fell 2.3 percent.

Commodity prices also fell sharply. Gold plunged $57.90, or 3.5 percent, to $1,614.10 an ounce. Many investors hold gold as a hedge against a weakening dollar, and the dollar strengthened Wednesday against the euro and the British pound.

The euro fell as low as $1.3106, its lowest point against the dollar in more than two weeks.

Gold doubled in price after the 2008 financial crisis and almost hit $1,900 an ounce, driven partly by fear about the global economy and partly by investors who saw an opportunity to make money from gold’s strong rally.

Silver fell more than 6 percent Wednesday, copper was down 3 percent, and crude oil dropped 2.4 percent.

In the United States, minutes from the last meeting of the Federal Reserve showed that members had a sunnier view of the economy because of strong gains in the job market in December, January and February.

But the Fed also signaled that it is unlikely to buy more bonds to help the economy. The Fed has embarked on two rounds of bond-buying in the past several years, most recently in August 2010, to lower interest rates and help stock prices.

“Despite the relatively strong run we’ve had in the U.S., there’s a number of headwinds out there, the main one being Europe,” said Bernie Kavanagh, vice president portfolio management at the investment firm Stifel Financial.

Traders sold European bonds and bought safer investments such as German bunds and U.S. Treasurys. The yield on the 10-year Treasury note fell to 2.25 percent from 2.29 percent late Tuesday.

Bank stocks, which typically decline when the European debt crisis flares, dropped sharply. Citigroup dropped almost 3.7 percent; Morgan Stanley, 3.2 percent; JPMorgan Chase, 2.4 percent; and Bank of America, 2.5 percent.

The stocks of materials and mining companies fell. Newmont Mining was down 4.9 percent, while Freeport-McMoran Copper fell 2 percent. Aluminum maker Alcoa Inc. fell 2.4 percent, one of the biggest declines in the Dow.

In other corporate news:

• Sears fell 7.2 percent. The retailer reportedly is planning to sell the casual clothing line Lands’ End, which it acquired in 2002.

• SanDisk, which makes memory cards and chips, plunged 9.5 percent, the most in the S&P, after the company cut its forecast for first-quarter revenue because of weaker demand and lower prices.

• Home marketer Hovnanian Enterprises Inc. dropped 7 percent on fears that a public stock offering of 25 million shares would dilute share value. The company is selling stock to reduce debt.

• GMX Resources, an independent oil and gas producer, shot up more than 22 percent after the company reported that a well drilled in North Dakota’s McKenzie County was producing oil at a 50 percent higher rate than a nearby well.

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