Marts plunge on ‘1,225’ fear

Trigger-happy investors dumped US stocks yesterday, scared by the market’s sudden fall through a key technical level brought on by more worries about Europe’s debt troubles.

The S&P 500 index steadily slipped through the morning until it broke through 1,225 points, when selling picked up in both the futures and cash markets. It closed at 1,216.13, down 20.78.

The Dow Jones industrial average fell 134.86 to 11,770.73 and the Nasdaq composite index dropped 51.62 to 2,587.99.

Investors have been increasingly focused on Europe, and markets were cautious early as bond yields in Spain, and Italy, where Italian Prime Minister Mario Monti won a crucial confidence vote, rose to levels viewed as unsustainable.

Some market sources cited political squabbling on the congressional super commitee formed to find ways to cut the US debt.

“It doesn’t take much if you’re teetering on a support or resistance level,” said Peter Costa, president of Empire Executions. “When you’re on the precipice of either one, and something comes out, this computer-generated trading pops into effect and that usually accelerates any reaction you’re seeing.”

The fall around midday was swift and volume picked up once the 1,225 level was breached. About 2.83 million S&P E-Mini futures contracts traded, with nearly 250,000 changing hands in an unusually busy 15-minute period when the market fell more than 1 percent.

The S&P struggled to break above 1,225 in August and September before piercing it on the way to a two-month high in late October. Computer-generated trading usually uses previous clusters of buying and selling as triggers.

Tech shares also dragged the market lower, with the S&P technology index down 2.2 percent. The 10 major S&P 500 sectors closed in the red for the day.