Stocks hammered by fears of global efforts to cool growth

NEW YORK —
Fears of a possible rise in borrowing costs globally sent the U.S.
stock market to its worst decline since mid-December on Wednesday.

The Dow Jones industrial average trimmed its losses
late in the day but still ended with a 122.28-point decline, the
biggest drop since Dec. 17. The blue-chip measure tumbled 1.1 percent from its 15-month closing high set in the previous session to end at 10,603.15.

The Nasdaq Composite Index fell 1.3 percent. The
S&P 500 Index fell 1 percent, led by a 1.7 percent decline in
energy. All the index’s other sectors were off as well.

Investors focused on a possible cutback in lending by Chinese banks and the hefty price that Greece may have to meet to bolster its troubled economy.

The dollar soared, while major stock indexes and
commodities were hit hard as investors sought safety. Such skittishness
across the financial markets has rarely been seen in 2010’s early
going, though some traders and analysts believe it may become the norm
in the weeks ahead.

“There’s been some nonchalance about the enormity of
the run we’ve had from the March lows and the headwinds that we face
moving ahead,” said strategist Peter Boockvar, of Miller Tabak in New York. “Now the news out of China today has jolted people out of that mentality a bit.”

Spooking investors was a report that the China Banking Regulatory Commission had asked several banks to stop issuing loans. While the CBRC’s chairman denied that he had asked banks to stop lending, Bank of China, one of the country’s big banks, said it was taking steps to rein in loans. Read more about China.

“People are concerned that the (stock) rally so far has been driven by liquidity. If China’s pulling away, it’s the first step in tighter monetary policy in general and worldwide we’ll see less liquidity,” said David Kupersmith, head trader at Third Wave Global Investors.

Companies with more international exposure, including Alcoa and Caterpillar were among the big decliners. Alcoa slipped 2.5 percent, while Caterpillar fell 1.9 percent.

Even a dose of upbeat earnings news failed to improve investors’ mood much. International Business Machines
slid 2.9 percent, after reporting late Tuesday that its fourth-quarter
profit rose 8.7 percent, more than analysts had estimated, but still
disappointed investors looking for higher growth rates.

Bank of America posted a
1 percent gain after its fourth-quarter report showed signs of
stabilization in the banking giant’s consumer-loan books.

Elsewhere, Kraft Foods fell 2.1 percent after Warren Buffett, the company’s biggest investor, expressed concern over Kraft’s deal to buy Cadbury PLC for $19.44 billion. Investors don’t have a vote on the deal.

Health care stocks reversed course after leading a big rally Tuesday on hopes that a Republican victory in the Massachusetts Senate
race would result in softer-line congressional legislation on health
care. Among the health care stocks that had climbed Tuesday, Coventry Health Care fell 1.9 percent Wednesday, while Humana fell 1.3 percent.

New economic data in the U.S. were downbeat. The Commerce Department
reported that housing starts fell 4 percent from the previous month,
more than the 0.2 percent drop economists expected. Read full story
about housing starts.

The dollar strengthened, with the U.S. dollar index,
which tracks the greenback against a basket of six currencies, up 1.1
percent.

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