Archive for February, 2010

Capital Gold Group Report: U.N. Nuclear Agency said Iran may be working on making nuclear warhead

February 23, 2010
VIENNA (AP) Feb. 19, 2010 — The U.N. nuclear agency on Thursday said it was worried Iran may currently be working on making a nuclear warhead, suggesting for the first time that Tehran had either resumed such work or never stopped at the time U.S. intelligence thought it did.

The report by the International Atomic Energy Agency appeared to put the U.N. nuclear monitor on the side of Germany, France, Britain, and Israel. These nations and other U.S. allies have disputed the conclusions of a U.S. intelligence assessment published three years ago that said Tehran appeared to have suspended such work in 2003.

The U.S. assessment itself may be revised and is being looked at again by American intelligence agencies. While U.S. officials continue to say the 2007 conclusion was valid at the time, they have not ruled out the possibility that Tehran resumed such work some time after that.

Iran denies any interest in developing nuclear arms. But the confidential report, made available to the Associated Press, said Iran’s resistance to agency attempts to probe for signs of a nuclear coverup “give rise to concerns about possible military dimensions to Iran’s nuclear program.”

Ali Asghar Soltanieh, Iran’s envoy to the IAEA, told the official IRNA news agency that the report “verified the peaceful, nonmilitary nature of Iran’s nuclear activities.”

But in Washington, U.S. State Department spokesman P.J. Crowley said the findings were consistent with what Secretary of State Hillary Rodham Clinton has been saying “on our ongoing concerns about Iran’s activities.”

The language of the report — the first written by Yukiya Amano, who became IAEA head in December — appeared to be more directly critical of Iran’s refusal to cooperate with the IAEA than most of those compiled by his predecessor, Mohamed ElBaradei.

It strongly suggested that intelligence supplied by the U.S., Israel and other IAEA member states on Iran’s attempts to use the cover of a civilian nuclear program to move toward a weapons program was compelling.

“The information available to the agency … is broadly consistent and credible in terms of the technical detail, the timeframe in which the activities were conducted and the people and organizations involved,” said the report, prepared for next month’s IAEA board meeting.

“Altogether, this raises concerns about the possible existence in Iran of past or current undisclosed activities related to the development of a nuclear payload for a missile,” said the report, which was also sent to the U.N. Security Council.

Iran is weathering three sets of Security Cuoncil sanctions meant to punish its refusal to freeze its uranium enrichment program. It’s recent rejection of a plan meant to strip it of most of its enriched stockpile plus its belated acknowledgment that it had been secretly building a new enrichment facility has increased sentiment for a fourth set.

The U.S., Britain and France support such a measure, with Russia undecided and fellow permanent Security Council member China — which depends an Iran for much of its energy needs — opposed.

Listing suspect activities known to it, the agency said it sought information on high-precision detonator and other explosives experiments; studies on setting off explosions high in the atmosphere; “whether the engineering design and computer modeling studies aimed at producing a new design for the payload chamber of a missile were for a nuclear payload,” and other nuclear activities with a possible military link.

“Addressing these issues is important for clarifying the agency’s concerns about these activities … which seem to have continued beyond 2004,” said the report.

The allegations build on material provided to the IAEA by U.S. intelligence from a laptop computer that reportedly was smuggled out of Iran. In 2005, U.S. intelligence assessed that information as indicating that Tehran had been working on details of nuclear weapons, including missile trajectories and ideal altitudes for exploding warheads.

Thursday’s 10-page IAEA report did not go into specifics, and it many of the alleged activities listed had appeared in previous reports. But a senior international official familiar with the IAEA probe of Iran told the Associated Press on condition of anonymity that the agency continued to receive new intelligence from agency member nations on activities allegedly linked to attempts to build nuclear arms.

Among the newer pieces of information being weighed by the agency and U.S. intelligence agencies is the significance of a technical document, which appears to describe a work plan for developing a neutron initiator, used to detonate a nuclear bomb.

A government official recently told the AP that document had been known to American intelligence for more than a year and had already been factored into current analysis of Iran’s nuclear program.

The report also confirmed Iranian claims of being able to enrich uranium to near 20%.

The senior official said the amount enriched to 19.8% in two days of operation last week was minute. Still, it was an important development that moved Tehran closer to the ability to make weapons grade uranium, should it opt to do so.

While enriching Iran’s present stockpile of low enriched uranium to 20% would take about one year, using up to 2,000 centrifuges at Tehran’s underground Natanz facility, any next step — moving from 20 to 90% — would take only half a year and between 500-1,000 centrifuges.

Iran has already amassed about 2 tons of low-enriched uranium — more than enough for further enrichment into material for one warhead. An IAEA-endorsed plan foresees taking 70% of that material to Russia for 20-percent enrichment and then to France for processing into fuel rods for Tehran’s research reactor.

The proposal was endorsed by world powers because it would ensure a continued supply of medical isotopes from the reactor for Iranian cancer patients while at the same time delaying Iran’s ability to further enrich to weapons grade uranium by stripping it of most of its low-enriched stockpile.

But the Islamic Republic rejected the plan and said it would make the reactor fuel on its own — a technical feat that world powers assert Iran is incapable of.

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Capital Gold Group Report: Iran to Begin Construction on Uranium Enrichment Facilities

February 23, 2010
TEHRAN, Iran (AP) — The head of Iran’s nuclear program said Monday his country hopes to begin construction within a year on two uranium enrichment facilities, which it plans to build deep inside mountains to protect them from possible attack.

Ali Akbar Salehi, who is also Iran’s vice president, said Tehran intends to use its more advanced centrifuges at the new sites, a decision that could add to growing concerns in the West over Tehran’s program because the technology would allow Iran to accelerate the pace of its program.

In November, Iran approved plans to build 10 industrial scale uranium enrichment facilities, a dramatic expansion of the program in defiance of U.N. demands it halt enrichment.

“Hopefully, we may begin construction of two new enrichment sites in the next Iranian year as ordered by the president,” the semiofficial ISNA quoted Salehi as saying Monday. The Iranian calendar year begins March 21.

“As of now, our enrichment sites … will be built inside mountains,” Salehi added, according to ISNA.

The decision appears to be aimed at shielding the facilities from possible attack. Israel considers Iran a strategic threat because of its nuclear program, and has hinted at the possibility of a military strike against Iran if world pressure does not halt Tehran’s nuclear efforts.

Iran’s enrichment of uranium is the central concern of the United States and other nations negotiating with the country over its disputed nuclear program. The technology can be used to generate fuel for power plants and isotopes for medical purposes, but it can also be used to make weapons-grade uranium for atomic bombs.

Tehran insists its enrichment work is only meant for peaceful purposes, but Washington and its allies are suspicious of Iran’s intentions and worry the program masks efforts to build a nuclear weapon.

Tehran has already said it may install its more advanced centrifuges at its small enrichment site near the holy city of Qom, which was made public last September. The new centrifuges are more advanced than the decades-old P-1 type centrifuges in use at the country’s main enrichment facility at Natanz, in central Iran.

Centrifuges are machines used to enrich uranium — a technology that can produce fuel for power plants or materials for a nuclear weapon. Uranium enriched to a low level is used to produce fuel, but further enrichment makes it suitable for use in building nuclear arms.

The new models will be able to enrich uranium much faster than the old ones — which means Iran could amass more material in a shorter space of time that could be turned into the fissile core of missiles, should Tehran choose to do so.

Tehran produced its first batch of uranium enriched to a higher level earlier this month, prompting the U.S. and its allies to seek new U.N. Security Council sanctions.

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Capital Gold Group Report: China Sovereign Wealth Fund buys into top gold ETF

February 23, 2010

Mineweb
Author: Maria Sutt
Posted:  Thursday , 11 Feb 2010

A confluence of technical factors suggest gold price support between $1,019/oz and $1,025/oz as outlook remains bearish, but CIC’s purchase of SPDR Gold Trust shares may represent the start of a more long term strategy.

China’s sovereign wealth fund, the China Investment Corporation has taken a $155 million stake in the SPDR Gold Trust. This underlines China’s voracious appetite for commodities and a desire to diversify its vast holdings of foreign exchange reserves which consist primarily of US dollars . This has led it to make its first investments in commodity-related exchange-traded funds and in the SPDR Gold Trust, the largest gold ETF. The stake of 1.45m shares is worth about $155.6m, or 0.4 per cent of the SPDR’s assets. It is a small investment considering the massive size of the Chinese sovereign wealth fund of some $300 billion but may represent the start of a more long term strategy to diversify into gold.

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Capital Gold Group Report: U.S. ‘Problem’ Banks Soar, Lending Drops, FDIC Says

February 23, 2010

By Phil Mattingly

Feb. 23 (Bloomberg) — U.S. “problem” banks climbed to the highest level in 17 years, signaling failures may accelerate in 2010, the Federal Deposit Insurance Corp. said. Bank lending had the biggest retreat in more than six decades.

The FDIC included 702 banks with $402.8 billion in assets on the confidential list as of Dec. 31, a 27 percent increase from 552 banks with $345.9 billion in assets at the end of the third quarter, the regulator said today in a quarterly report. “Problem” banks account for 8.7 percent of all U.S. lenders.

“The growth in the number and assets of institutions on the problem list points to a likely rise in the number of failures,” FDIC Chairman Sheila Bair said today at a Washington news conference. “Both the problem list and bank failures tend to lag behind economic recovery.”

Regulators are closing banks at the fastest pace since 1992, seizing 20 lenders through seven weeks this year after shutting 140 institutions in 2009 amid loan losses stemming from the collapse of the home and commercial mortgage market. A total of 28 banks failed in 2007 and 2008 combined.

“The pace is going to pick up this year and is going to exceed where we were last year,” Bair told reporters.

Banks showed “incremental” improvement in the fourth quarter, Bair said. Overall profit was $914 million, compared with a $38 billion loss in the year-earlier period. Net charge- offs slowed for a third consecutive quarter, the agency said.

“It’s not that this was a strong quarter,” Bair said. “It’s simply that everything was so bad last year.”

Income Slips

Banks reported combined net income of $12.5 billion for 2009, compared with $4.5 billion in 2008. The industry reported net income of $100 billion in 2007.

Industry lending fell as banks seek to emerge from the worst financial crisis since the Great Depression. Loans fell 7.5 percent in 2009, the largest annual decline since 1942, Bair said.

Sun Trust Banks Inc., the seventh-biggest U.S. bank by deposits, reported commercial lending in 2009 declined 21 percent, or about $8.5 billion, from the previous year, according to a regulatory filing today.

The lending declines reflect tightened standards imposed on borrowers combined with a drop in consumer demand, the FDIC said. Larger institutions accounted for 90 percent of the lending retreat, the agency said.

“The large banks need to step up to the plate” to increase lending, Bair told reporters.

Assets Decline

Industry assets declined 5.3 percent to $731.7 billion for the year, the largest annual drop in the since the FDIC was created more than 75 years ago, the agency said.

Banks, especially smaller community lenders, are “bumping along the bottom” of the credit cycle, Bair said.

“A wrenching experience of this magnitude takes time to get over and while there are signs of improvement it’s still a very difficult time for a lot of institutions,” Eugene Ludwig, chief executive officer at Promontory Financial Group and former Comptroller of the Currency, said today in a Bloomberg Television interview.

Provisions for loan losses fell 14 percent to $61.1 billion in the fourth quarter from the year-earlier quarter, the FDIC said.

The agency insures deposits at 8,012 institutions with $13.1 trillion in assets. The insurance fund is maintained to reimburse customers for deposits of as much as $250,000 when a bank fails.

Insurance Fund Deficit

The insurance fund deficit widened to $20.9 billion from $8.2 billion in the previous quarter, when the account had its first negative balance since 1992. The FDIC last year required banks to prepay three years of premiums, raising $46 billion on Dec. 30, the agency said today. The fourth-quarter balance doesn’t reflect the payments, as premiums are to be phased in each quarter during the next three years, the agency said.

The agency also has the authority to tap a $500 billion credit line with the Treasury Department.

The FDIC may gain power in the overhaul of the financial regulatory system. House and Senate lawmakers are considering expanding the agency’s authority to wind down systemically important, non-bank financial institutions, such as insurer American International Group Inc., which contributed to the collapse of the financial system in 2008.

Bair has requested the power to deal with the failing firms. The House passed a bill giving Bair the new authority while in the Senate, Banking Chairman Christopher J. Dodd, a Connecticut Democrat, is drafting the language of its bill.

A draft of the Senate bill will be put together “in the coming days,” Dodd said yesterday in Washington.

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Capital Gold Group Report: Investment Demand for Gold Higher in 2009

February 17, 2010

NEW YORK (The Street) — Investment buying drove gold demand higher in 2009, according to full-year results from the World Gold Council.

In an independent report by GFMS Limited for the World Gold Council, investment demand rose 7% vs. a year ago, making it the only subsector of gold demand to report growth. The advent of ETFs like SPDR Gold Shares iShares Comex Gold Trust and ETFS Gold Trust have made it easier for hedge funds, institutions and average investors to invest in gold. According to the survey, ETF demand was 85% higher than in 2008, which represents an inflow of $17.7 billion. These results starkly contrast to industrial and jewelry demand both down 16% and 20%, respectively with the exception of China, which saw an increase of 30.3 tons in total consumer demand.

Overall identifiable gold demand fell 11% during 2009 as gold prices reached record highs across all currencies, $1,227 an ounce in U.S. dollars. “One of the most important [trends] is the diversity of demand … in dollar terms demand was actually maintained at just over $100 billion for the full year,” says George Milling-Stanley, managing director of the World Gold Council. “Demand was diverse geographically [as well] with China coming along to rival India as the largest consumer in the world.” India demand was down 33% from 712.6 tons to 480 tons, but just fourth-quarter jewelry consumption rose 8% from the previous quarter leading many analysts to believe that demand from India is slowly improving as the global economy stabilizes.

According to Milling-Stanley, 2010 total gold demand will keep improving as long as the world avoids a double-dip recession. He is watching consumption figures from China, India and the U.S. as well as the growth rate of investment demand. The combination of recovering physical demand as well as rising investment demand “would be the ideal paradigm for the gold price.”

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Capital Gold Group Report: Gold Ends Up 2.7%

February 16, 2010

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NEW YORK (MarketWatch) — Gold futures finished 2.7% higher on Tuesday, benefiting from a slide in the dollar against the euro as concerns about Greece’s debt ebbed. The market showed little immediate reaction to news of a bomb exploding just outside of the Athens office of J.P. Morgan Chase & Co. There were no injuries, according to initial reports. Gold for April delivery finished up $29.80, or 2.7%, at $1,119.80 an ounce at the New York Mercantile Exchange.

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Capital Gold Group Report: Gold Prices Pop

February 16, 2010

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February 16, 2010

NEW YORK (The Street) —  Gold prices soared today as the U.S. dollar weakened.

Gold for April delivery was adding $28 to $1,118 an ounce at the Comex division of the New York Mercantile Exchange. Prices have traded as high as $1,121.90 and as low as $1,092. The U.S. dollar index was slipping 0.86% to $79.68.

Risk appetite pushed gold prices higher as U.S. investors returned after a long holiday weekend. Investors typically buy gold contracts on the first trading day of the week after closing out some of their positions before the weekend. Also supporting gold’s rally are continued talks over a European Union bailout for Greece. Reportedly the eurozone countries are giving the country a month to improve its high debt levels before forcing Greece to impose tax increases and spending cuts. Details on what kind of financial support the EU could eventually provide the debt-laden country are still uncertain and any failure to resolve the crisis will lead to a decline in the euro and weigh on gold prices.

For now market sentiment remains positive and trading conditions stay thin. Barclays reported a 2009 profit that more than doubled which fueled risk appetite and Chinese markets are closed for New Year celebrations. Thinner markets can lead to higher and more volatile price swings.

But some analysts are optimistic. “[This is] the end of the correction,” Peter Grandich, chief commentator on Agoracom.com. “We need to get above $1,125 to officially, technically put it behind us … we need two trading days above [this level] … today I think we should hold most of these gains. The rest of the week I think we’re going to see the shorts give one last chance to stop the rally, but the surprises in gold … will be mostly to the upside.”

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Capital Gold Group Report: Gold Hits New Euro high

February 15, 2010

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Mon February 15, 2010 6:36 pm

INTERNATIONAL. The price of gold rose sharply in early London trade Monday, recording its highest-ever Gold Fix in Euros as global stock markets rose, government bonds slipped, and the major currencies were little changed.

Touching $1,100 an ounce for the first time in 7 trading days, the Gold Price in Dollars stood 5.2% above early February’s’s 14-week low at Us$1,045 an ounce.

Financial markets in China – where the government raised banking reserve requirements for the second time this year on Friday – were closed for the first of four public holidays to celebrate the Lunar New Year.

US markets will re-open on Tuesday after Presidents Day.

“We are looking at a possible change in the intermediate trend,” says Phil Smith in his Reuters India Technical Gold analysis, “but it is early days and the chart still indicates downside potential.

“Gold still has a high correlation with stocks and a high negative correlation with the Dollar.”

US-Dollar Gold Prices and the S&P 500 stock index have only moved in opposite directions on nine of the 29 trading days in 2010 so far, with a one-month correlation of +0.93 by Friday’s finish.

That figure would stand at +1.00 if they moved perfectly in lockstep together.

Gold and the Euro, on the other hand, have moved in opposite directions vs. the Dollar on 10 occasions, with a one-month correlation of +0.83.

Losing more than 10% against the Dollar in the last nine weeks, the European single currency today held steady near US$1.3600.

The Gold Price in Euros meantime came within 0.5% of Deember’s all-time intraday high, recording its best-ever London Gold Fix above €807 an ounce.

“Gold has attractions for those managers of private institutional funds who are wary not only of the Dollar but of Sterling, the Yen and the Euro,” writes senior columnist John Plender in the Financial Times.

“Gold, by contrast, has no fiscal dimension…And for gold investors in the current period of exceptionally low interest rates, the opportunity cost – the income forgone on other investment opportunities – is unusually low.”

New data released after Friday’s close by US regulator the Commodity Futures Trading Commission showed a further retreat from the record speculative “froth” in Gold Futures and options reached as the metal hit all-time highs against almost all major currencies in late autumn 2009.

Amongst speculative traders, the net long position of bullish minus bearish bets shrank 14% in the week-ending Tuesday night (February 9th). Now equivalent to 694 tonnes of gold, this “non-commercial” net long has now fallen at its fastest pace month-on-month since the Lehman Bros.’ collapse of fall 2008.

Bullishness amongst “commercial traders”, in contrast – meaning those gold miners, refineries and bullion wholesalers who use the Gold Futures market to hedge their trading book – jumped to a 10-month high of almost one contract in every three they held last week.

Just shy of the commercial traders’ five-year average, it rose from 27.5% to 30.1%.

“The week ahead looks to be important for precious metals,” said one London dealer’s note this morning, “as gold, platinum and palladium all have trend-lines converging. The inevitable break of one of these levels will give us a good technical signal.”

Silver prices meantime held flat early Monday, trading tight around last week’s finish of US$15.55 per ounce.

Crude oil ticked higher but the broader commodities market fell after Japan reported a smaller-than-expected rise in Dec.’s industrial production.

Following Greek government complaints that “speculators” were driving the country’s bond prices lower and maliciously selling the Euro for profit – claims dismissed as “piffle” by The Economist magazine – Madrid’s El Pais newspaper said yesterday that Spain’s secret service is investigating “speculative attacks” on the nation’s fiscal position.

“Greece must take extra measures to make its recovery plan credible,” said European Central Bank president Jean-Claude Trichet this morning ahead of Tuesday’s key meeting of finance ministers.

Last week’s European Union summit failed to produce any concrete action on Greece’s plunging government bonds and yawning public-purse deficit.

Fifty-three per cent of German voters surveyed this weekend by Emnid pollsters for the Bild am Sonntag newspaper said Greece should be expelled from the Eurozone “if necessary”.

“Solving this problem cannot be about aid for Greece,” announced coalition-government member Otto Fricke to Welt am Sonntag.

“If anything, it’s about keeping any damage away from German tax payers.”

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Capital Gold Group Report: DOW CLOSES BELOW 10,000 – FIRST TIME IN 3 MONTHS

February 8, 2010

WSJ Logo.gifFEBRUARY 8, 2010, 4:17 P.M. ET

A slump in financial stocks sent the Dow Jones Industrial Average to its first close below 10000 in three months as concerns about the global economy and U.S. interest-rate policy simmered.

The blue-chip measure fell 103.84 points, or 1%, to 9908.39, near its intraday low in a session that saw selling accelerate into the closing bell. The Dow was led lower by a 3.5% decline in Bank of America, while American Express fell 2.8%, Travelers fell 2.5%, and J.P. Morgan Chase fell 1.6%.

Investors weighed a report in The Wall Street Journal that Federal Reserve Chairman Ben Bernanke will begin laying the groundwork for credit tightening later in the year, bringing to a close a period of historically low interest rates that have made it easier for ailing banks to book big profits.

Market participants also kept a close eye on financial instability in Europe, where issues surrounding the creditworthiness of several countries have recently surfaced, sending shockwaves through the financial markets.

The Dow slipped below 10000 in each of the previous two trading sessions but in each case was rescued from a finish below the milestone as bargain hunters swooped in before the closing bell.

Traders said that the round-number level, which the Dow has repeatedly crossed over the past decade, still carries some psychological significance in its own right. Under the current circumstances, many are also curious whether it might be a stepping stone on the way to a 10% correction for the market, which many Wall Street veterans say is overdue.

The Dow is now down 7.6% from its 15-month high set on Jan. 19.

“This is the first time in three months that I think we’ve moved into a lower trading range,” said portfolio manager Uri Landesman, of ING Investment Management. “Clearly, the sovereign-debt worries are first and foremost for the market right now. We’re going to need some more clarity on that before we establish a new trend.”

Keith W. Springer, president of Capital Financial Advisory Services, noted that market watchers had been saying for months that a pullback has been necessary, but now that the rally in stocks has come to a pause for several weeks, it has been met with increased fear and concern.

“Every time you have a market run-up everybody goes, ‘We need a 10% correction,’ and as soon as the market drops 5%, you have everybody crying,” Mr. Springer said.

The S&P fell 0.9% to 1056.74, led by a 2.2% decline in its financial category. All its other sectors posted declines as well, with the industrials, materials, and utilities categories down more than 1% each.

The Russell 2000 declined 1.1%. The technology-heavy Nasdaq Composite fell 0.7%.

Among stocks to watch, Rubbermaid rose 1.7% after Morgan Stanley lifted its investment rating on the stock to “overweight” from “equal weight.”

Home Depot rose 2.2% after Morgan Stanley upgraded the home-improvement chain’s shares to an “overweight” rating from “equal weight.”

Hasbro leapt 12.7% after the toy company posted a 77% jump in fourth-quarter profit, exceeding analysts’ forecasts. Hasbro also said it expects to grow revenue and earnings this year.

CIT Group slipped 0.5% after the commercial lender named ex-Merrill Lynch CEO John Thain as its new leader.

CVS Caremark jumped 5.3% after the pharmacy-services company reported an 11% rise in net profit, topping expectations.

United Parcel Service fell 1% after announcing plans to furlough at least 300 of its pilots, citing a continued need for belt-tightening due to the slow pace of the U.S. economic recovery.

In other markets, the dollar weakened against both the euro and the Japanese yen. Crude-oil futures climbed and gold futures rose, snapping a three-day losing streak. Treasurys were little changed, with the 10-year note off 1/32 to yield 3.573%.

—Kristina Peterson and Donna Kardos Yesalavich contributed to this article

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Capital Gold Group Report: Global Fears Grind Down Stocks

February 4, 2010

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FEBRUARY 4, 2010, 5:00 P.M. ET

Fears about the global economy and sovereign credit hammered stocks Thursday, causing the Dow Jones Industrial Average to briefly cross below 10000, though it settled slightly above the mark.

Other markets gyrated as well, with commodities reeling while Treasury prices and the dollar rose as investors sought safety.

The Dow fell 268.37 points, its worst one-day point slide since April 20, 2009. The measure was off 2.6% for the day to end at 10002.18, a three-month low.

Throughout the day, investor fretted over signs that Europe’s governments are struggling to finance their debts and that America’s employment picture may not be improving as much as expected.

“We may be in a run-for-the-hills scenario,” in the sovereign-debt markets, said Ben Inker, director of asset allocation at the portfolio-management firm GMO. “You really do have to ask the question, what is the purpose of government bonds in my portfolio? If their purpose is to be the low-risk asset, what do we do if we don’t see them as low-risk and there aren’t yields to compensate us for that?”

In the credit markets, the cost of insuring the debt of eurozone members with large budget deficits against default rose, dashing hopes that the European Commission’s qualified endorsement of Greece’s budget plan would calm investor fears.

The moves followed news that the European Commission had put Greece under more pressure to cut its deficit; that the Portuguese government sold only €300 million ($417 million) of treasury bills at an auction, compared with an indicative offer of €500 million; and that the Spanish government had raised its budget deficit forecasts for 2010 through 2012.

Worries about Europe caused the euro to hit an eight-month low against the dollar. That helped to propel the broad U.S. Dollar Index to trade 0.7% higher.

“Anyone who thought the euro was going to be the next reserve currency has got to be questioning that this week,” said Duncan Richardson, executive vice president at Eaton Vance Management in Boston. “It’s not ready for prime time yet.”

In U.S. economic news, initial claims for jobless benefits unexpectedly rose last week. The four-week moving average, which aims to smooth volatility in the data, also increased, sending a troublesome signal ahead of monthly payrolls data due Friday morning.

Twenty-nine of the Dow’s 30 components fell, with Bank of America suffering the most, off 5% after New York Attorney General Andrew Cuomo filed civil securities fraud charges against former bank executives Kenneth Lewis and Joseph Price over their handling of the Merrill Lynch acquisition.

The only Dow stock to post gains was Cisco Systems, up 0.4% as investors responded to a better-than-expected profit report.

The Nasdaq Composite Index was off 2.9%. The S&P 500 fell 3.1%, hurt by declines in every sector. Financials were the weakest, off 4.2% as a group.

MasterCard slid 10.3% after the credit-card issuer reported a smaller than expected rise in quarterly earnings. Visa, which reported results after the close on Wednesday, gained 0.6% as its results bested analysts’ forecasts.

The Chicago Board Options Exchange’s Volatility Index, which measures investors’ nervousness about upcoming market swings, leapt 20.9%.

The dollar’s bounce hurt the prices of commodities traded globally in terms of the U.S. currency. Oil futures slid fell $3.84 a barrel, or 4.99% to $73.14 in New York, the lowest settlement since Jan. 29 and the biggest one-day loss in crude since July 29. Gold contracts fell almost $47 to $1,065.50 per ounce. The Dow Jones-UBS Commodity Index was off 2.2%.

Treasury prices climbed, with the 10-year note up 26/32 to yield 3.606%.

—Donna Kardos Yesalavich and Kristina Peterson contributed to this article.

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