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Markets struggled to post gains since the opening bell yesterday as a poll in Greece showed anti-bailout SYRIZA party was favorably placed to win next month’s crucial election. Moreover, Spain’s borrowing costs surged to their highest levels since it entered the euro. Thus, with cross-Atlantic concerns gathering strength, US benchmarks suffered another gloomy day and the global markets too were negatively impacted. While investors stayed away from riskier bets, the 10-year Treasury note plunged to its weakest level since World War II.

Just a day after registering triple-digit gains, the Dow Jones Industrial Average (DJI) slumped 160.83 points or 1.3% to close at 12,419.86. Thus, not only did the blue-chip index wash out all of Tuesday’s gains, but yesterday’s drop extended these losses further. The Standard & Poor 500 (S&P 500) crashed 1.4% and finished yesterday’s trading session at 1,313.32. The tech-laden Nasdaq Composite Index plunged 1.2% to move 33.63 points lower to 2,837.36. Amidst heightened fears, the fear-gauge CBOE Volatility Index (VIX) jumped 14.8% and settled at 24.14. Consolidated volumes on the New York Stock Exchange, the Nasdaq and American Stock Exchange were 6.3 billion shares, somewhat lower than the year-to-date average of roughly 6.81 billion shares. The decliners completely outnumbered the advancing stocks on the NYSE; as for every six stocks that dropped, only one stock could manage to climb higher.

Things in Greece took little time to take a turn for the worse. On Tuesday, markets clocked up strong gains following easing fears regarding Greece exiting the euro as a belief that a pro-bailout party would win key elections gained strength. It increasingly seems that Greece will have to exit the euro, as post the recent elections the country has failed to form a government. Thus, political uncertainties have led many to believe that the country would not receive the next tranche of bailout from the international lenders. Therefore, as hopes about the pro-bailout party winning the election spread, the markets chalked up rare gains.

However, in a complete reversal of events, a recent poll showed yesterday that anti-bailout SYRIZA party was most likely to win the June 17 election. The SYRIZA party is a radical leftist party which is strongly against austerity norms while wanting Greece to stay on in the euro. Thus, investors’ doubt intensified following the poll results that saw the SYRIZA party winning 30% of the votes if the elections were conducted currently. SYRIZA party is against even the international bailout deal and the austerity measures, which is a key requisite for international lenders to grant Greece the bailout money. The pro-bailout conservative New Democracy party was in second place and the poll showed it would manage to get only 26.5% of the vote.

While investors were unnerved by the poll results, which intensified the possibility of Greece exiting the euro, Spain too added to the worries with its rising borrowing costs. The 10-year bond yield of Spain spiked to 6.7% and is well near the level which is considered ‘unsustainable’. Spanish borrowing costs have now reached the highest levels since the launch of euro in 2002.

These concerns left the benchmarks languishing in the red all day long and the financial sector was hit hard. The Financial Select Sector SPDR (XLF) plunged 2.3% and the KBW Bank Index (BKX) crashed 2.5%. Among financial stocks, Bank of America Corporation (NYSE:BAC), Citigroup, Inc. (NYSE:C), Morgan Stanley (NYSE:MS), The Goldman Sachs Group, Inc. (NYSE:GS) and Wells Fargo & Company (NYSE:WFC) lost 3.1%, 3.8%, 4.0%, 3.3% and 1.7%, respectively.

Homebuilder stocks were also battered as an economic reading on the housing sector was highly disappointing. The National Association of Realtors reported that after three consecutive months of gains, pending home sales dropped lower in April. The report noted that Pending Home Sales Index contracted 5.5% to drop to 95.5 from 101.1 in March. Moreover, the decline in April was contrary to consensus expectations of a 0.7% increase. However, the index was 14.4% higher than April 2011 and buoyed by this gain, Lawrence Yun, chief economist at NAR said: “Home contract activity has been above year-ago levels now for 12 consecutive months. The housing recovery momentum continues”.

Following the report, PHLX Housing Sector (HGX) dropped 4.1% and shares including PulteGroup, Inc (NYSE:PHM), Lennar Corporation (NYSE:LEN), D.R. Horton, Inc. (NYSE:DHI), KB Home (NYSE:KBH) and M/I Homes Inc. (NYSE:MHO) dropped 3.5%, 6.7%, 4.7%, 7.2% and 12.6%, respectively.

Separately, as investors refrained from riskier bets, the U.S. Treasury market, one of the world’s largest with $11 trillion in its kitty, is now considered to be a safer place. Investors thus rushed to towards this safer option and led the treasury prices higher with yields reaching an almost 60 year low. The 10-year yield on notes was down 13 basis points to 1.62%, the lowest level since World War II.

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