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Stocks Close Down; Commodities Slammed

Worries over European debt again plagued Wall Street, sending stocks down at the close for a third straight day in a selloff that also hit commodities and energy stocks hard.

The Standard & Poor's 500 and Dow industrialslost about 1 percent each, with energy down nearly 3 percent. All 10 S&P 500 sectors were negative with materials and industrials also getting hammered. Financials and health care were closest to positive territory.

Fears from European debt contagion again ruled the markets.

"It's a chronic disease," said Mitchell Goldberg, president of Client First Strategy in Woodbury, N.Y. "It's going to go on for years, but if we keep the keep the patient alive while the rest of the world has a chance to strengthen itself, then we'll be OK."

However, some big banks erased losses, led by JPMorgan Chase . The KBW Bank Index rose 0.2 percent.

Technology was getting the worst of it, with the Nasdaqoff nearly 1.5 percent.

Losers beat gainers on the Dow industrials about 4 to 1.

Heavy machinery maker Caterpillar led the bluechips lower after it said it would sell a part of its Bucyrus distribution business to the industrial division of Malaysia's Sime Darby for about $360 million.

ExxonMobil and Cisco also pulled down the Dow 30, while General Electric and Merck were the best performers.

In the tech world, Joy Global missed earnings estimates, with profits of $1.82 a share, and issued a cautious guidance that unnerved investors.

Automotive, mining and leisure stocks were among the biggest losers.

Airlines were one of the few positive areas, with United Continental Holdings among the group's leaders.

Gold prices continued their precipitous fall, dropping sharply in morning trade. The yellow metal fell below its 200-day moving average for the first time since January 2009.

Bespoke Investment Group points out that previous dips below the key metric often have been positive for gold.

"Over the following week, month, three months, six months, and one year, the price of gold has averaged gains with positive returns two thirds of the time," Bespoke said in an analysis. "While gold saw negative returns in the three, six, and twelve months following the end of its 1980 and 1988 streaks, following the four remaining streaks the close below the 200-DMA turned out to be a pause that refreshed for gold."

Oil, on other hand, could be in for tougher days.

The price of US crude fell below $96 a barrel and could have much more room to drop should the global economic slowdown continue, despite actions by the Organization for Petroleum Exporting Countries.

"OPEC’s decision to raise the official target for the cartel’s output to close to the current level of production probably had little impact," Julian Jessop, chief global economist at Capital Economics, said in a note. "While we think OPEC’s decision will make no real difference on the ground, the bigger picture is that the latest demand forecasts from both OPEC and the (International Energy Agency) still look too high and that oil prices have further to fall."

Volume again was light, with just 926 million shares changing hands on the New York Stock Exchange. Market breadth was largely negative, with losers beating gainers about 2.5 to 1.

"The issue is the retail investor is losing interest in this," Goldberg said. "They see another debacle coming out of Europe that could go on for years and years and are saying to themselves, 'Why should I even bother doing this? I should just pay off my debts, pay off my mortgage.'"

In Europe,an auction of Italian sovereign debt saw the euro zone's third-largest economy pay a euro era record yield of 6.47 percent to sell five-year paper. The sale came after the EU tried to move towards greater fiscal integration at last week's summit, adding to investor concerns.

The National Bank of Greece has indicated it will seek shareholders' approval for a 1 billion-euro government bailout, sending its shares sharply higher.

HTC, the world's No. 4 smartphone maker, said a U.S. court has further postponed a final ruling on its lawsuit against Apple, which is seeking a ban on sales of HTC devices in the U.S. market.

Morgan Stanley will return about $700 million to investors in its real-estate mega fund and slash fees to extend the investment vehicle's life till June 2013, the Wall Street Journal said, citing people familiar with the matter.

Avon Products is looking for a new chief executive to replace Andrea Jung, who has lost the confidence of Wall Street after a myriad of problems, including a federal bribery probe and weak sales in key international markets.

In economic news, mortgage applications rose 4 percent in the past week. The positive news came a day after the National Association of Realtors admitted that its data for the past several years has been flawed, resulting in a substantial overcount of the actual home sales during the period. A final count will be issued next Wednesday.

Also, import prices showed their biggest rise in seven months at 0.7 percent, though it was less than economists had expected. The gain came mostly from rising petroleum prices.