After a strong showing on Tuesday, markets worldwide faded early in intraday trading Wednesday morning. The Dow Jones (INDEX: ^DJI ) is down 0.5% while the Nasdaq Composite (INDEX: ^IXIC ) is down about 1.75%.
So what happened?
The European Central Bank decided to dish out almost $650 billion in funds to try to ease fears of a credit crunch that could take the already vulnerable eurozone to an even worse place. The ECB handed out three-year loans -- the longest maturity on record -- to over 500 banks in Europe. This was easily the most aggressive refinancing operation the ECB has undertaken, in what should be a signal of the seriousness with which the ECB plans to assist credit-hungry banks.
However, markets and analysts alike weren't buying it. Extremely strong demand for the funds illustrated to the markets that banks are now turning more and more toward the ECB as tensions rise and lending has become more and more tight. The ECB is hoping the cash will trickle down to household balance sheets, but unfortunately, many believe the banks will just hoard the funds in anticipation of greater exposure to troubled nations inside the eurozone.
The Foolish bottom line
The ECB plans to release another three-year allotment at some point, but for now, it seems as though this giant funding has done little to ease market fears. As I noted in an earlier article this week, I'd be very wary when thinking about purchasing European bank stocks; make sure to do your due diligence and realize this sector is very, very volatile.
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