Euro, U.S. stocks fall on ECB, Fed minutes

Wed May 16, 2012 4:58pm EDT
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By Herbert Lash

NEW YORK (Reuters) - U.S. stocks and the euro slid on Wednesday on news that some Greek banks face emergency funding needs, while minutes from the Federal Reserve's April meeting showed U.S. economic prospects remain sobering.

The European Central Bank stopped funding operations for some Greek banks as they are undercapitalized, the ECB said, confirming a Reuters report that had fanned concerns about Greece's financial difficulties.

The funding needs highlighted the weak state of the banking sector in Greece, where many Greeks are withdrawing money out of fear their country may soon leave the euro zone.

The euro slid and shares in Europe closed lower in choppy trading as worries mounted over the stability of the euro zone. Greece plans to hold fresh elections in mid-June that likely will determine whether it remains in the common currency area.

"All eyes continue to be trained on Europe, what is going to happen in Greece, what the potential fallout from that is going to be," said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.

The Dow Jones industrial average .DJI closed down 33.45 points, or 0.26 percent, at 12,598.55. The Standard & Poor's 500 Index .SPX fell 5.86 points, or 0.44 percent, at 1,324.80. The Nasdaq Composite Index .IXIC shed 19.72 points, or 0.68 percent, at 2,874.04.

Efforts by German Chancellor Angela Merkel and new French President Francois Hollande to quell talk of a possible Greek exit from the euro zone bolstered sentiment for much of the day.

But U.S. stocks retreated on the ECB news and the Fed minutes, which showed several members of the U.S. central bank's policy-setting committee had indicated that additional monetary policy accommodation could still be necessary.   Continued...

Traders work on the floor of the New York Stock Exchange, May 15, 2012. REUTERS/Brendan McDermid