×

Stocks Skid Amid European Debt Worries

U.S. stocks fell sharply Tuesday, with the Dow down more than 200 points, as the dollar rallied against the euro amid worries about the European debt crisis.

The dollar was close to a one-year high against the euro as investors worried that Greece may not pull off its austerity measures and that debt problems could spread to other countries.

"Despite all these bailouts, we don't know if Greece can actually work this out. More importantly, 'Will this spread?' is the concerning question," Bruce Bittles, chief investment strategist at Robert W Baird, told Reuters. "Remember, we are still in a fragile global economy in need of government support," he said.

The market was buzzing with a fresh round of speculation that Spain might be next to need a bailout.

Prime Minister Jose Luis Rodriguez Zapatero shot back that such speculation was "complete madness." Zapatero said any speculation about the euro zone outside of Greece was "totally unfounded and irresponsible."

Adding to the worries, investor Marc Faber told Bloomberg that China's economy could "crash" in the next year as the nation's property bubble is about to burst. “The market is telling you that something is not quite right,” Faber told the news service.

This echoed comments investor Jim Chanos made in an interview with Charlie Rose last month, where he said China is "on a treadmill to hell" and "can’t afford to get off this heroin of property development."

The CBOE volatility index, widely considered the best gauge of fear in the market, spiked more than 20 percent to over 25.

Investors shrugged off a pair of encouraging U.S. economic reports. Pending-home sales rose 5.3 percent in March, slightly better than expected, while factory orders jumped 1.3 percentin March, significantly better than the 0.1-percent drop expected.

On Monday, stocks logged their biggest gain since mid-February, with the Dow up more than 140 points.

The biggest decliners today were materials, industrials and technology, with Caterpillar, Alcoa and Hewlett-Packard leading Dow decliners.

Financial stocks skidded as the Senate prepares to cast its first votes on the financial-reform bill with a number of amendments coming to the floor for discussion.

Bank of America and JPMorgan were down more than 1 percent, while Citigroup fell more than 2 percent.

Nearly all of the 30 Dow components were lower, except Merck, Pfizer and Walmart .

Merck beat profit estimates with its report this morning, though it offered a cautious outlook.

And Pfizer, the world's largest drug maker reported a huge jump in first-quarter revenue, helped by its acquisition of Wyeth last year, but charges dragged on net income.

BP shares were among the only gainers today. BP is building a relief well to contain the Gulf oil spill and is also giving millions of dollars to Gulf Coast states to move recovery efforts forward.

Swiss bank UBS reported its strongest quarterly profit since the global financial crisis began. But expectations were already high for European banks and the market was disappointed with the results.

Still to Come:

WEDNESDAY: BOE monetary-policy meeting; weekly mortgage apps; ADP, Challenger job reports; Fed's Rosengren speaks; ISM services index; weekly crude inventories; earnings from Anheuser-Busch, Qwest, Time Warner, Garmin, CBS and Symantec
THURSDAY: Chain-store sales; ECB announcement; weekly jobless claims; productivity; Bernanke speaks; earnings from Activision, Kraft
FRIDAY: Goldman Sachs shareholders meeting; April jobs report; Fed's Plosser speaks; consumer credit; earnings from Liberty Media

More From CNBC.com: