Wall Street plunges amid concerns over Libya crisis

The sell-off in Wall Street continued on Wednesday as political tensions in Libya showed no signs of easing.

After Libyan leader Muammar Gaddafi said in a defiant speech on Tuesday that he would not step down and promised tougher action against rebels, the unrest in the country escalated. Heavy gunfire broke out in Libya’s capital city Tripoli, making investors fear the unrest would spread to more countries in the region, especially to those major oil producers like Iran and Algeria.

Meanwhile, oil prices soared on concerns that long-lasting supply disruptions or even permanent damage would happen to Libya’ s oil industry. U.S. crude prices briefly crossed 100 dollars a barrel on Wednesday, the first time since October 2008, before settling at 98.10 dollars a barrel on the New York Mercantile Exchange, advancing nearly 10 percent in two trading sessions,

The Chicago Board Options Exchange Volatility Index, which is regarded as a gauge of uncertainty or fear in the market for its tendency to rise when stocks fall, rose 6.4 percent to 22.13, the highest level since Nov. 30. The gauge gained as much as 41 percent in the latest two sessions, the most since May.

On economic front, sales of previously occupied homes rose 2.7 percent to a seasonally adjusted annual rate of 5.36 million in January, according to the National Association of Realtors. The rise was a surprise for most analysts, but it failed to boost sentiment as the median sales price for an existing home fell to the lowest level in nearly nine years, showing the housing market was still one of the weakest points in the economy.

Hewlett-Packard tumbled nearly 10 percent to lead the Dow’s decliners on Wednesday after the technology giant posted a 16 percent quarterly profit increase but disappointed investors with weak revenue growth. It also lowered revenue forecasts for the rest of its fiscal year, even as it raised profit targets.

The Dow Jones industrial average dropped 107.01 points, or 0.88 percent, to 12,105.78. The Standard & Poor’s 500 Index was down 8. 04 points, or 0.61 percent, to 1,307.40. The Nasdaq lost 33.43 points, or 1.21 percent, to 2,722.99.

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