Irish bailout fears hit US stock market

Stocks fell on Wall Street for a fourth day sparked by concerns over a slowdown in China and talks about a bailout for Irish banks.

The Dow Jones industrial average was pushed to its lowest level in a month.

Asian markets started a global sell-off after South Korea's central bank raised interest rates to curb inflation. Shares also fell in Shanghai and Hong Kong as speculation spread that China will take more steps to rein in its red-hot economy, which would dampen global demand for industrial goods.

"The fact that China is taking actions to tighten things up over there is having a big ripple effect here," said Bruce Simon, the chief investment officer at Ballentine Partners.

The Dow Jones industrial average fell 178.47, or 1.6 %, to 11,023.50, having dipped below 11,000 earlier in the day for the first time since October 20.

The Standard & Poor's 500 index fell 19.41, or 1.6 %, to 1,178.34, while the Nasdaq composite index fell 43.98, or 1.8 %, to 2,469.84.

All 10 industry groups in the Standard and Poor's 500, the index followed by most professional money managers, fell. Companies in the materials and energy industries lost the most ground, each falling more than 2 %.

While Asian countries are dealing with excessive economic growth and inflation, European finance ministers were concerned that Ireland would be the latest European country to need a bailout. The Government has so far refused any outside financial assistance.

A fiscal crisis earlier this year in Greece resulted in a global slide in stock prices as investors questioned the viability of the euro. Greece was eventually bailed out in May by fellow European nations and the International Monetary Fund.

Ireland's situation is different from Greece's, but the respective debt crises are having similar effects on markets. As new doubts emerge about Europe's ability to keep its financial system sound, investors are abandoning the euro, flocking to the dollar, dumping risky assets like stocks and sending borrowing rates for countries they see as credit risks soaring.

The yield on 10-year Irish bonds rose to 8.25% from 7.94% late on Monday. Yields rise as bond prices fall. Higher yields are a sign that investors are demanding more money for their willingness to take on the risk of lending to that country.

Greece fell into a fiscal crisis following runaway spending and a lack of trust from investors following revelations that the government had published faulty budget figures. Ireland, meanwhile, is staggering under the costs of bailing out three banks after that country's property boom imploded.

"It's been simmering for a while," Scott Brown, chief economist at Raymond James & Associates, said of the European debt problems. "Now it's coming to a complete boil."

Brown said Ireland is more troublesome for Europe than Greece because more of Ireland's debt is held by major banks, especially in England. A default by Ireland could be another blow to banks that have only recently recovered from the global credit crisis. Shares of British banks HSBC and Barclays both fell more than 3%.

There are also fears that if Ireland needs a bailout it will spook investors who hold debt from other European countries.

Ireland is a "precursor to Spain", said Quincy Krosby, a market strategist at Prudential Financial. "It's a precursor to Portugal" as well.

Basic materials companies, which have benefited from the booming demand from China, were among the biggest losers in US trading. Freeport-McMoRan Copper & Gold Inc. fell 4.3%, Alcoa was off 2.8%, and Monsanto Co. was off 2.4%.

The dollar surged against the euro, approaching its highest level against the shared European currency since late September. The dollar also jumped 0.8% against an index that measures it against a group of six other currencies.

Treasury prices rose for the first time in three days, sending yields lower as investors sought out relatively safe assets. The yield on the 10-year note edged down to 2.86% from 2.95%.