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US stocks fall on European economic, debt worries

At the close, the Dow was down about 76 points, the Nasdaq was down about 31 points, and the S&P 500 was down about 11 points

By Stan ChoeAssociated Press / August 16, 2011

Traders work on the floor of the New York Stock Exchange Tuesday, Aug. 16, 2011. It was the first time in seven trading days that the Dow lost or gained fewer than 100 points.

Richard Drew / AP

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Worries about Europe's economic and debt problems Tuesday sent stocks to their first loss in four days.

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The major indexes bounced up and down in another volatile day. The Dow Jones industrial average fell more than 120 points in the first half hour of trading after a report showed that Germany's economy stalled last quarter and dragged down growth for Europe.

The Dow pared most of its losses by noon, but resumed its drop after the leaders of France and Germany tried to calm worries about Europe's debt problems by pushing for long-term political solutions. Investors were hoping for immediate financial measures like the introduction of a single bond jointly backed by the eurozone's members. The Dow fell as many as 190 points in the early afternoon before again recovering.

At the close, the Dow was down 76.97, or 0.7 percent, to 11,405.93. It was the first time in seven trading days that the Dow rose or fell by less than 100 points. The Standard & Poor's 500 index fell 11.73, or 1 percent, to 1,192.76. The Nasdaq composite fell 31.75, or 1.2 percent, to 2,523.45.

"The real question the market is trying to answer is: Are we going to have another recession or not?" said John Burke, head of Burke Financial Strategies with $200 million in assets under management. "Today, the answer is maybe yes because it doesn't look like Europe has figured out a solution to its debt."

A proposal for a Europe-wide tax on financial transactions also hurt stocks, said Nick Kalivas, vice president at broker MF Global. "It's another slap in the face to the banking system" and would cut into profits and limit trading, he said. "The path toward economic growth still looks pretty uncertain."

In the U.S., economic reports on Tuesday were mixed: Housing remains weak, but factory output rose last month at its fastest pace since an earthquake in Japan disrupted global manufacturing in March.

"Investors don't know which way to go here," said Paul Brigandi, senior vice president of Direxion Funds, which has about $7 billion in assets under management.