Late rally erases steep losses on Wall Street

NEW YORK — A big final-hour comeback pulled the Dow Jones industrial average nearly back to where it started Wednesday.

The Dow was down as much as 191 points earlier as the threat of a financial crisis spreading from Europe shook markets. The euro dropped to a nearly two-year low against the dollar, and oil prices sank to their lowest this year.

A late surge of buying erased nearly all of the Dow's deficit, leaving it down just 6.66 points at 12,496.15 by the end of the day. The Standard & Poor's 500 index rose 2.23 points to 1,318.86. The Nasdaq rose 11.04 points to 2,850.12.

In the last hour of trading, news crossed that the leaders of France and Italy favored using region-wide bonds to support Europe's economy. That gave traders hope that a summit of European leaders might produce concrete steps to tackle the economic morass there. The Organization for Economic Cooperation and Development warned Tuesday that the 17 countries that use the euro risk falling into a "severe recession."

Benchmark stock indexes dropped more than 2 percent in Germany and France and 3 percent in Spain and Italy.

The euro continued to fall against the dollar, reaching $1.25, the lowest since July 2010. Concerns about the stability of the European currency union if Greece leaves have knocked 5 percent off the euro this month. Yields on German government bonds fell as money shifted into low-risk investments.

If Greece exits, it could spread havoc throughout the global financial system. Bond traders could dump the bonds of Spain and Italy, sending their borrowing costs even higher. Banks in those countries could also be crippled if people start to yank money out of them, as has begun to happen in Greece.

Facebook rebounded 3 percent to $32 after getting pounded for two days following an initial public offering that was plagued with technical problems and has drawn scrutiny from regulators. The stock is still far below its initial price of $38.

Benchmark crude lost $1.95 to $89.90 in New York trading. Oil has plunged 15 percent in May as investors predict that the European economy will continue to slow.

The dollar rose and yields on U.S. government debt fell as traders shifted money into the protection of Treasurys. The yield on the 10-year note sank to 1.73 percent, close to a record low, from 1.77 percent late Tuesday.

The dollar and Treasurys often trade in tandem when anxiety hits markets. Traders from around the world sell foreign assets and then buy dollars before buying dollar-denominated U.S. Treasurys.

A poor earnings report from Dell helped tug down other tech stocks, including Intel and Microsoft. Dell reported disappointing results after the market closed Tuesday and predicted weak sales for its second quarter. Dell dropped 17 percent.

Google gained 1 percent following news that a federal jury ruled against Oracle in its patent-dispute case against the Internet search giant.

Ford rose 2 percent, a day after the company won back its blue oval logo, factories and other assets that were pledged as collateral for a massive loan taken out last decade.

Guess rose 6 percent after its first-quarter results beat Wall Street's expectations, and an analyst recommended that investors buy the stock.