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If Greece’s leaders allow the bailouts to continue and European governments start spending to spur growth, Kelly expects the market eventually to rise. If Syriza wins and Greece is expelled from the euro, he expects a volatile market for months.
Amid the tumult, Europe’s executive branch called on the 17 countries that use the currency to create a "banking union" that can centrally oversee and, if needed, bail out national banks.
If Europe’s financial crisis plunges it into a deep recession, global economic growth will likely falter, reducing demand for commodities and machines that power growth.
Fearing that outcome, traders pushed the stocks of heavy equipment maker Caterpillar and aluminum company Alcoa to among the biggest declines of the 30 companies that make up the Dow.
The euro fell as low as $1.2360, the lowest since the summer of 2010. Benchmark stock indexes closed down 2.2 percent in France, 1.8 percent in Italy and Germany.
When banks and big investors get frightened, they sell stocks or bonds and park the money in the safest government debt markets. They buy Japanese yen, German bonds and especially U.S. Treasurys.
Such purchases are not about turning a profit, said O’Donnell of RBS. That’s why German government two-year notes are paying zero percent: People are simply handing their money over for safekeeping.
The U.S. Treasury market is still considered one of the safest places in the world to stash billions in a hurry. At $11 trillion, no other market is as large, so there’s always somebody ready to buy or sell them.
"When people just want to get their money back, there’s not a lot of competition," O’Donnell said.
Food and energy commodities fell sharply. Crude oil lost more than $3 to below $88 a barrel. Crude has been falling steadily since the beginning of May, when it traded as high as $106 a barrel.
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Kelly, of J.P. Morgan Funds, said investors should remember that the U.S. is on firmer economic footing than Europe, and make sure their portfolios could withstand either possible outcome.
"Things could be much better, or much worse, than the markets have priced in," Kelly said. "The only logical investment strategy is to be balanced — to get to the middle of the boat."
Among U.S. stocks making moves:
— Monsanto, the agricultural company, was one of the few big gainers in a sea of red. It jumped 2.2 percent after its CEO said this year’s earnings will likely surge 25 percent, far more than Wall Street had been expecting. Sales were strong in its seed and chemicals business, including Roundup herbicides.
— Research in Motion, maker of the BlackBerry, plunged 7.1 percent after the company said late Tuesday it had hired a team of bankers to help it weigh its options — Wall Street jargon for a possible sale or reorganization. RIM’s business has been crumbling as smartphone users move to iPhone and Android devices.
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Daniel Wagner can be reached at www.twitter.com/wagnerreports.
AP Business writer Matthew Craft in New York contributed to this report.
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