NEW YORK Global equity markets, crude oil and the euro fell on Thursday on growing fears of a banking collapse and debt default in Cyprus, and signs the economic downturn in Europe is deepening.
Upbeat U.S. reports on housing, future economic activity and business conditions in the mid-Atlantic region and improving Chinese factory output failed to lift investor sentiment.
A drop in U.S. stocks accelerated late in the session as traders pared back their risk exposure and the Cypriot government sought to impose capital controls to stem a flood of funds leaving the island.
Just before U.S. markets closed, Standard & Poor's cut the sovereign long-term credit rating of Cyprus deeper into junk status.
"The realization is there isn't going to be a quick remedy to the situation, nor is it easy to forecast what's going to happen," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.
"Uncertainty breeds selling, especially in a market that's gone as far as we have in the previous two weeks," said James, referring to this year's rally in equities.
Prices of U.S. Treasuries and German Bund futures rose as investors tried to gauge whether Cyprus would reach a deal to enable it to avoid default and a possible financial meltdown.
The benchmark 10-year U.S. Treasury note was up 11/32 in price to yield 1.9199 percent. Bund futures rose 11 ticks to 144.41.
The European Central Bank gave Cyprus until Monday to raise billions of euros to clinch an international bailout or face losing emergency funds for its banks and inevitable collapse.
Gold rallied to its highest in almost a month, with nervousness over Cyprus fueling sentiment for the safe-haven metal. U.S. gold futures for April delivery settled up $6.30 an ounce at $1,613.80.
U.S. stocks were also hit by a severe earnings miss by Oracle Corp ORCL.O and after a number of brokerages cut their price targets on the tech icon. Oracle fell $9.6882 to $32.30.
The Dow Jones industrial average .DJI was down 90.24 points, or 0.62 percent, at 14,421.49. The Standard & Poor's 500 Index .SPX was down 12.91 points, or 0.83 percent, at 1,545.80. The Nasdaq Composite Index .IXIC was down 31.59 points, or 0.97 percent, at 3,222.60.
European shares fell after Germany, the region's leading economy, showed signs of fatigue and French businesses turned in their worst performance in four years in March. France, the euro zone's second-biggest economy, likely fell into a recession.
The decline on Wall Street came even as more data showed a slow but steady U.S. economic recovery. U.S. home resales hit a three-year high and prices jumped in February, while factory activity in the U.S. mid-Atlantic region grew in March after contracting for two months in a row.
Another report showed the Conference Board's Leading Economic Index, a gauge of future U.S. economic activity, rose for a third straight month in February.
The euro zone's economic woes occurred even before Cyprus' bailout troubles took center stage.
"Maybe we were expecting it in France but the weakness in Germany was a surprise," Antonio Garcia Pascual, chief southern European economist at Barclays, said of the two European mainstays' performances.
Disappointing German data made investors already nervous about Cyprus's debt crisis wary, though some analysts expected losses in equity markets to be short-lived.
Autos .SXAP, sensitive to market sentiment, fell sharply, as did German synthetic-rubber maker Lanxess (LXSG.DE), which joined the list of auto suppliers to take a hit from anemic European car markets.
The FTSEurofirst 300 index .FTEU3 of top European shares closed down 0.7 percent at 1,190.72.
MSCI's all-country world equity index .MIWD00000PUS fell 0.57 percent to 357.60.
Crude oil was pushed lower by fears of further turmoil in the euro zone and by manufacturing data showing a deepening downturn in the currency bloc.
Brent crude futures for May delivery fell $1.25 to settle at $107.47 a barrel. U.S. crude futures for May settled down $1.05 at $92.45.