ECONOMY -- August 10, 2011 at 4:39 PM EDT
Dow Closes Down 520 Points, Reverses Tuesday Gains
The rollercoaster stock market took another downward turn Wednesday, with the Dow closing down 520 points, wiping out Tuesday's recovery from a 600-point dip on Monday.
The bad news comes after a Tuesday announcement by the Federal Reserve that it will freeze low interest rates until 2013, and a one-day rally that raised the prospect that the dip would not lead to continued volatility. The Federal Reserve's announcement was also accompanied by a dim view of the prospects for economic recovery, an uncertainty that has hurt investor confidence.
In addition to the S&P rating downgrade in the United States, the roiling debt crisis in Europe has fueled investor uncertainty. On Wednesday the Stoxx Europe 600 Index fell by 3.8 percent. Markets in Asia -- boosted by late-day gains in the United States -- fared slightly better, with Japan's Nikkei Index showing a 1 percent gain.
According to the New York Times,
The plunge on Wall Street, which reached around 4 percent in late trading, drove home a powerful message to investors: That the rally of about 4.7 percent in the Standard & Poor's 500 index and other indexes on Tuesday had no basis to last.
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