Stocks plunged sharply to log their worst day in six weeks Wednesday as investors were rattled by fears over the euro zone crisis.
The Dow Jones Industrial Average tumbled 389.24 points, or 3.20 percent, to close at 11,780.94, led by BofA and JPMorgan .
The S&P 500 dropped 46.82 points, or 3.67 percent, to finish at 1,229.10. The Nasdaq slumped 105.84 points, or 3.88 percent, to end at 2,621.65.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, surged more than 30 percent to close above 36.
All 10 S&P sectors closed firmly in negative territory, led by banks and materials.
Stocks slumped further after the Greek President called for a meeting of political leaders on Thursday after the nation’s two main political parties failed to agree on who will lead the country’s interim government.
Earlier, Reuters reported that Greek party leaders had agreed on house speaker Filippos Petsalnikos to head Greece’s new coalition government, but the decision may have been withdrawn.
In addition, EU officials said they have no plans in place for a financial rescue of Italy, and adding the euro zone was not even considering extending a precautionary credit line to Rome.
“The problem is, we’ve reached the domino phase, so it’s not about Greece anymore—it’s Italy and if Italy has a problem, then France has a problem too,” said Brian Battle, vice president of trading at Performance Trust Capital Partners. “The hope that there would be a solution is now non-existent.”
Italian borrowing costs reached a breaking point, closed over 7 percent, a level that previously drove other euro zone nations such as Greece and Portugal out of credit markets and forced those countries to seek bailouts from external assistance from the EU and IMF. However, most strategists worry that Italy is too large to bail out.