Italian bonds break through 7% and no bailout plan is in sight

Whatever positivity was gained by Tuesday��s resignation announcement of Italian Prime Minister Silvio Berlusconi was thrown right out the window Wednesday.

U.S. and European markets alike were sent reeling Wednesday as Berlusconi��s insistence on elections, rather than an interim government, threatened national economic reform, sending the yield on the Italian 10-year bond past the 7% point — a mark that prompted similar worries for Greece, Ireland and Portugal. Later in the afternoon, after American indices began to flatten out, EU officials announced that a bailout of Italy wasn��t forthcoming. The Dow Jones finished down 389.24 points, or about 3.2%, and the S&P tumbled about 46.82 points, or nearly 3.7%.

The European Central Bank began buying up scores of Italian bonds to soften the situation, but Italy��s lack of a debt solution had traders selling furiously through the day��s end. The euro zone��s continued free fall into economic chaos had German Chancellor Angela Merkel calling for deep reforms throughout Europe.

The fallout in stocks was significant. HSBC (NYSE:HBC) had the misfortune of reporting ghastly earnings before a dreadful trading day. HSBC not only announced a 36% drop in third-quarter adjusted profits, but it warned it might have to leave the U.K. over a possible $2.5 billion annual hit from new regulations. HSBC��s stock dropped about 9% almost immediately and never recovered, ending at $39.99.

But even strong earnings reports weren��t enough to stem the Italian tide. General Motors (NYSE:GM) reported EPS of $1.03 on Wednesday, a drop from a year ago but a seven-cent beat of analyst expectations, and its revenues of $36.7 billion were right on target. GM��s reward? A nearly 11% haircut, with GM stock at $22.31 by day��s end.

Unsurprisingly, other foreign financials were shredded Wednesday, with ING Group (NYSE:ING, $7.49), Barc! lays (NYSE:BCS, $10.71), Royal Bank of Scotland (NYSE:RBS, $6.59) and Deutsche Bank (NYSE:DB, $36.13) all eating losses of 10% or more.

Three Up

• Barnes & Noble (NYSE:BKS): Up 13.72% ($1.65) to $13.68.
• SodaStream International (NASDAQ:SODA): Up 5.63% ($1.92) to $36.03.
• Best Buy (NYSE:BBY): Up 1.42% (38 cents) to $27.22.

Three Down

• Rovi Corp. (NASDAQ:ROVI): Down 38.66% ($17.79) to $28.23.
• Sina Corp. (NASDAQ:SINA): Down 10.86% ($9.44) to $77.50.
• Alpha Natural Resources (NYSE:ANR): Down 9.72% ($2.79) to $25.91.

As of this writing, Kyle Woodley did not own a position in any of the aforementioned stocks. Check out recaps from previous trading days here.

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