A stock sell-off driven by renewed worry over Europe made clear Monday that the continent’s debt crisis remains a threat to the U.S. recovery and President Obama’s reelection chances.
Markets were spooked Monday morning by the news that multiple regions of Spain, and not just the nation’s banking system, might need a bailout. Adding to the gloom was a report that Greece could lose its bailout lifeline if it fails to effect certain reforms, an outcome that could shatter the eurozone.
The quick reaction in the markets indicates Europe will continue to be dead weight on the U.S. recovery and a problem for Obama, whose bid for a second term could hinge on how voters feel about the economy.
The Dow Jones Industrial Average shed roughly 200 points in the first moments of Monday’s trading before recovering to close the day down about 100 points. The Nasdaq and S&P 500 experienced similar drops as officials in Spain and Italy issued bans on short selling to try and tamp down the frenzy.
The political strife fueling Europe’s debt crisis is showing few signs of abating, with most expecting it to remain a dark cloud over financial markets at least through the November election, if not longer.