04/10/2012 04:49 pm ET Updated Apr 10, 2012

Stock Market Struggles With Worst Losing Streak Since August

This is starting to get out of hand a little bit.

Stocks on Tuesday suffered their worst selloff of the year and their fifth straight day of losses, the worst such streak since last August.

The Dow Jones Industrial Average tumbled 213.66 points on Tuesday, or 1.7 percent, to 12,715.93, its lowest close since early February. This was the fifth straight losing day for the blue-chip stock index, the longest losing streak since July to August of last year, when the United States lost its AAA credit rating and financial markets lost their minds for a while.

The S&P 500-stock index fell 1.7 percent to 1358.59, also its fifth straight loss and its lowest close since early March.

And the Nasdaq fell 1.8 percent to 2991.22, its lowest close since early March.

This collapse follows a months-long drunken rally, fueled by easy money from the Federal Reserve and European Central Bank and a mistaken hope that the European debt crisis was all fixed up.

Well, surprise, surprise, the European debt crisis is not all fixed up. Spanish and Italian bonds have been getting hammered for the past several days. Borrowing costs for Spain have jumped to their highest levels since last fall, when Europe's last flare-up.

Back then, European policy makers gave Europe's debt problems a big swift kick down the road, led by the ECB, which pumped free cash into European banks. Now we've finally gotten to the place where the can landed, and apparently it's time for another kick.

Threats of a global economic slowdown continue to frighten the markets. Europe's economy is in recession, while China's economy is slowing, and the disappointing March jobs report raised fears the U.S. economy is losing steam, too. Expectations for first-quarter corporate earnings are low, in part because of the ongoing debacle in Europe.

Making matters worse for stimulus-hungry markets, the Fed recently denied them an immediate fix of fresh cash.

European stock markets took an even more brutal beating on Tuesday, with Germany's DAX index down 2.5 percent, Italy's main stock index down 5 percent and Spanish stocks down 3 percent.

The Chicago Board Options Exchange's Volatility Index, the market's so-called "fear gauge," jumped to its highest level in more than a month. The VIX has risen for eight straight days, its longest such streak in nearly nine years, according to Reuters.

In another sign of market fear, investors fled back to the relative safety of U.S. Treasury bonds -- don't laugh! Yields on those bonds dropped to 1.98 percent, the lowest in more than a month.

Bank of America was the biggest loser in the Dow industrials, dropping more than 4 percent. Financial stocks in general had an awful day, as they tend to suffer the most whenever financial crises flare up, which sort of makes sense. JPMorgan Chase lost nearly 2 percent, while Citigroup fell 3 percent.

European banks naturally took it even worse, with France's Societe Generale down about 6 percent, Spain's Banco Santander off 4 percent and Germany's Deutsche Bank down 4 percent.

With the help of a rally that started last fall -- and included the best first quarter for the Dow and S&P since 1998 -- U.S. stocks surged to their highest levels since before the crisis, almost without stopping. Many investors thought stocks had gotten ahead of themselves.

It's still too early to call this a full-fledged market panic, the Dow is only down about 4 percent from its high in early April, after all. But it's also still too early to say it's all over.