Dow dips below 10,000 then bounces back up

May 26, 2010 at 12:00a.m.

Associated Press

NEW YORK

A rally pushed the Dow Jones industrials back over 10,000 after the stock market sank to its lowest level of the year Tuesday. The late-day rebound did nothing to erase lingering worries about Europe’s debt crisis.

The Dow plunged more than 250 points after the opening bell and stayed under 10,000 most of the day, then charged back to finish down only 22 when signals from Washington suggested banks would not be forced to sell their lucrative derivatives units as part of financial reform. The Standard & Poor’s 500 index even managed a slight gain.

But investors still are concerned about European debt, and that’s likely to mean more turbulent days like Tuesday. The market worries that even austerity measures by governments there will not be enough to fix the problem and fight off a prolonged economic slump in Europe, or even another global recession.

“It seems like the Europeans are playing ‘tag, you’re it’ — first it was Greece, and now it’s maybe Spain or Portugal,” said Jonathan Corpina, a New York Stock Exchange floor trader and president of Meridian Equity Partners.

“We know someone else is next. The problem is that it seems like every plan in place isn’t going to satisfy the needs,” he said.

Britain’s Queen Elizabeth opened Parliament with a warning of hard times, saying in a speech on behalf of Britain’s new government that there would be budget cuts.

Other European countries are imposing budget cuts as well, trying to control their debt. Investors are concerned that these steps will stifle economic growth and that the growth of other countries, including the U.S., inevitably will be stunted.