Stocks fell Wednesday after Europe's central bank reported that its overnight deposits hit another record, the latest indication of worry among European lenders.
The Dow Jones industrial average fell 100 points in morning trading, and the Standard & Poor's 500 index fell after five days of gains.
The European Central Bank said the continent's banks parked a record $590.72 billion overnight. That means those banks are unwilling take the risk of lending to each other in the short term, opting to earn low interest rates from the ECB instead. The disclosure also hurt the euro, which fell 1 percent against the dollar, to $1.29.
The worrying news from the ECB overshadowed two successful auctions of Italian government debt. Italy was able to pay much lower borrowing rates than it did in auctions last month. The strong demand from investors raised hopes that Italy would be able to avoid sinking into a financial crisis, as smaller countries like Greece and Portugal have.
John Merrill, chief investment officer at Tanglewood Wealth Management, said markets would remain vulnerable to flare-ups in Europe's long-running debt crisis until leaders there come up with more convincing solutions for paying down their enormous debt loads and keeping the 17-nation shared currency union intact.
"We live in a Band-Aid world," Merrill said. "Nobody really is addressing underlying issues."
European leaders agreed at a summit Dec. 9 to forge closer fiscal ties over the long term, but investors are still worried that Greece might default on its debt or be forced to leave the euro bloc, disrupting its own economy and potentially causing big losses for European banks that hold Greek government debt. That could potentially cascade into another global financial panic, as happened in 2008 following the collapse of the U.S. investment bank Lehman Brothers.
The Dow Jones industrial average fell 103 points at 12,188 as of 11:30 a.m. Eastern. Materials and energy companies were leading the declines. Alcoa Inc. fell 1.4 percent. Only one of the 30 stocks in the Dow average rose, AT&T Inc.
Trading was very quiet in a holiday-shortened week. Markets were closed Monday in observance of Christmas. The Dow closed 2 points lower Tuesday.
The S&P 500 was down 11 points at 1,254. It was the first decline for the S&P index after five days of gains. The Nasdaq composite declined 25 points at 2,600.
The Bank of Italy raised $11.8 billion in two bond auctions, reflecting investor approval of the country's recently passed austerity measures. The yield on Italy's six-month bill offering was half the interest rate the country paid in a similar auction last month. The yield on the country's 10-year bond remained dangerously high, however, at 6.93 percent. It had risen to 7 percent Tuesday, a level that is considered unsustainable.
Italy is the euro zone's third-largest economy and is considered too big to save under the euro zone's current bailout funds. Investors have grown fearful over the past few months that Italy will find it difficult to pay off its massive debts, which stand at around $2.5 trillion.
The worries were reflected in U.S. bank stocks. Bank of America Corp. fell 2 percent, while Regions Financial Corp. fell 3 percent.
In other corporate news:
-- Sandridge Energy Inc. stock is down 3 percent on news that it is selling drilling rights in two states to a Spanish energy company, Repsol YPF.
-- Cavium Inc. fell 1 percent, a day after the chipmaker said its fourth-quarter results will fall below its previous forecast.