NEW YORK (AP) - A warning from Fitch Ratings that large U.S. banks could be hit hard if Europe's debt crisis spreads sent stocks on a downward spiral late Wednesday.
U.S. indexes were moving between small gains and losses before Fitch released its report around 3:15 p.m. Eastern time. The Dow was down just 36 points with an hour of trading left, then plunged to end the day down 190.
Fitch, one of the three main credit ratings agencies besides S&P and Moody's, said in its report that U.S. banks could be "greatly affected" if Europe's debt crisis continues to spread beyond the financially distressed countries of like Greece, Ireland, Italy, Portugal and Spain.
Large banks took a late afternoon dive. Bank of America Corp. and JPMorgan Chase & Co. each lost 3.7 percent. Goldman Sachs dropped 4.1 percent and Morgan Stanley 7.9 percent.
"This is a long-running, slow developing story," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. U.S. stocks had rallied in the past week as new governments took over in Greece and Italy and promised to implement budget reforms. It's a familiar pattern, Ablin said. "It seems like it's always one step forward and two steps back."
The Dow Jones industrial average closed at 11,905.59, a loss of 190.57, or 1.6 percent. It was the Dow's first close below 12,000 since last Thursday.
The Standard & Poor's 500 index fell 20.89 points, or 1.7 percent, to 1,236.92. The Nasdaq composite lost 46.59, or 1.7 percent, to 2,639.61.
Concerns that the debt troubles of Greece and Italy could spread have been driving the borrowing rates of France higher on bond markets since the beginning of November. The benchmark borrowing rate on France's 10-year bonds was just 2.54 percent on Oct. 5 but has risen steadily since then, reaching 3.69 percent Wednesday.
For the moment, Fitch said the risks to U.S. banks from Europe appeared to be "manageable," however investors have been quick to respond to even seemingly minor negative news about how Europe's debt woes might affect the rest of the global financial system.