Stocks slide, following European markets lower

FILE - In this Wednesday, March 20, 2013 photo, Trader Anthony Riccio, center, works on the floor of the New York Stock Exchange. Asian stocks followed Wall Street higher on Wednesday March 27, 2013 after upbeat economic data from the world's largest economy. But in Europe, markets were unsteady ahead of the release of more indicators that would provide further clues about the health of the world's leading economies. (AP Photo/Richard Drew)

NEW YORK (AP) — Worries about Europe weighed on the stock market Wednesday, a day after the Dow Jones industrial average had its biggest gain in three weeks.

Investors are watching to see if Cyprus can restore confidence in its banking system. They are also keeping an eye on Italy, where political parties are struggling to form a new government in the eurozone's third-largest economy.

The Dow was down 38 points, or 0.3 percent, at 14,522 with an hour left in the trading day. It had lost as many as 120 points in morning trading before climbing back.

The Standard & Poor's 500 index dropped one point to 1,562, just three points short of its all-time high.

Bad news out of Europe and good news from the U.S. have tossed the stock market around over the past week. "There are still plenty of worries about (Europe's) banking system," said J.J. Kinahan, chief derivatives strategist at TD Ameritrade. "But the U.S. really is on a nice little roll."

Kinahan said he thinks the S&P 500 will recover its losses and could make another run at the all-time high on Thursday.

Cyprus is working out details for how to reopen its banks on Thursday after a nearly two-week shutdown. An international bailout agreement calls for money from large depositors to be used to help pay for the rescue of its banking system.

In Italy, a center-left party failed in its attempt to form a new government. The political stalemate has raised concerns that the country will be able to manage its deep debts, undermining confidence in the euro.

Those worries hit Europe's bond markets especially hard. Borrowing rates for Italy and Spain shot higher, a sign of weaker confidence in their financial health. Rates for Germany and France, two of Europe's more stable countries, sank as traders shifted money into their bonds.

News about Italy also helped drive traders into the safety of U.S. government bonds, pushing benchmark yields to their lowest level this month. The yield on the 10-year Treasury note dropped to 1.85 percent, a steep fall from 1.91 percent late Tuesday.

In other trading, seven of the 10 industry groups in the S&P 500 index fell. Two groups that investors tend to buy when they want to play it safe, utilities and health care, made slight gains.

The Nasdaq composite inched up one point to 3,253.

The S&P 500 closed within two points of its all-time high of 1,565 on Tuesday, helped by rising home prices and orders for manufactured goods. The stock index hit that peak on Oct. 9, 2007, before the Great Recession and a financial crisis roiled financial markets.

Among other stocks making big moves:

— Cliffs Natural Resources, an iron ore mining company, plunged 15 percent, the biggest loss in the S&P 500. Analysts warned that falling iron ore prices would likely sink the company's stock. Cliffs fell $3.14 to $18.29.

— Science Applications International Corp. surged 5 percent after the security and communications technology provider reported a fourth-quarter profit that was better than analysts were expecting. SAIC also announced a special dividend of $1 per share. Its stock gained 58 cents to $13.40.