* GM slides on Europe warning
* Financials among top drags, KBW Banks index off 4 pct
* Indexes off: Dow 1.8 pct, S&P 2 pct, Nasdaq 2.1 pct
By Angela Moon
NEW YORK, Nov 9 U.S. stocks fell about 2
percent on Wednesday as a spike in Italian bond yields
heightened fears the debt crisis in Europe was spreading.
The selloff hit all 10 S&P sectors, with financials down
nearly 3 percent as investors dumped bank stocks on concerns
about their exposure to European debt. The KBW Bank index fell 3.1 percent.
Italian bond yields shot up to 7.502 percent, a new high
since the euro was introduced in 1999, as investors unloaded
the debt after a clearing house increased margin calls. Prime
Minister Silvio Berlusconi's promise to resign failed to
persuade markets the country would deliver on economic reforms.
"We just added another layer of uncertainty. The issue with
Italy brings the region closer to a broader negative scenario
and raises more concerns about a financial crisis," said Bob
Pavlik, the chief market strategist at Banyan Partners in New
Portugal and Ireland were forced to seek bailouts when
their borrowing costs reached similar levels.
The Dow Jones industrial average tumbled 217.74
points, or 1.79 percent, at 11,952.44. The Standard & Poor's
500 Index slid 25.48 points, or 2.00 percent, at
1,250.44. The Nasdaq Composite Index took off 57.56
points, or 2.11 percent, at 2,669.93.
Reflecting growing market anxiety, the CBOE Volatility
Index VIX jumped 13.5 percent. The index usually moves
inversely to the S&P 500 as traders use it as a hedge against a
further market fall.
Italy has replaced Greece at the center of the euro zone
debt crisis and is seen teetering on the cusp of requiring a
"Italian bonds are essentially serving as another fear
index like the VIX, and right now they're reflecting a lot of
fear," said Charles Reinhard, deputy chief investment officer
at Morgan Stanley Smith Barney in New York.
Among bank stocks, Morgan Stanley fell 5.9 percent
to $16.30 and Goldman Sachs Group Inc dropped 5 percent
to $103.16. Bank of America Corp lost 3.2 percent to
General Motors Co slid 7.4 percent to $23.19 after
the automaker said it would not break even for the year in
Europe, as it had forecast, due to deteriorating conditions in