NEW YORK (AP) — U.S. stocks fell Thursday after the head of the European Central Bank said there was no existing plan for large-scale government bond purchases, as many in the markets had hoped.

ECB President Mario Draghi's remarks sent borrowing costs for Italy, Spain and other countries with heavy debt burdens sharply higher. European stock indexes fell and the euro weakened against the dollar. Draghi made his comments after the central bank cut its benchmark interest rate to 1 percent and took other modest steps to help shore up Europe's financial system.

Bank stocks led the way lower in midday trading. JPMorgan Chase & Co. slid 2.4 percent, the most of the 30 large companies in the Dow Jones industrial average. Morgan Stanley plunged 6.4 percent.

"People are very nervous that Europe will yet again fail to adequately address the sovereign debt crisis," says David Kelly, chief market strategist for JP Morgan Funds. He says investors overlooked good news on the U.S. economy Thursday: Claims for unemployment benefits dropped, and wholesale companies increased their inventories in expectation of stronger sales.

The Dow Jones industrial average fell 128 points, or 1.1 percent, to 12,068 as of 12 noon Eastern. If the Dow closes lower, it will break a three-day run of modest gains.

The S&P 500 fell 16, or 1.3 percent, to 1,245. The Nasdaq lost 27, or 0.9 percent, to 2,622.

In France, French President Nicolas Sarkozy and German Chancellor Angela Merkel tried to muster support from other European leaders for their latest bid to save the euro currency from collapsing under the weight of huge government debts. A summit that begins later Thursday has been billed as a make-or-break moment to convince markets that Europe will take bold enough action to prevent the euro from breaking up.

The yield on benchmark 10-year Italian government bonds jumped a quarter of a percentage point, a large move, to 6.12 percent as investors sold government debt following Draghi's remarks. The yield on Spain's 10-year bonds rose one-third of a percentage point to 5.71 percent.

Traders sent yields on Italian government bonds above 7 percent last month, a level at which weaker countries like Greece and Portugal were forced to seek relief from their lenders. When borrowing costs jump too high, it threatens a government's ability to pay off existing debts and could ultimately lead a government to default.

Markets had interpreted recent remarks by Draghi to mean that the ECB would step in to buy government bonds if nobody else would. His comments Thursday dampened those expectations. Large-scale purchases of European government bonds by the ECB would send borrowing rates for indebted European countries sharply lower and ease strains on Europe's financial system.

Among companies making large moves, Costco Wholesale Co. fell 1.2 percent after reporting earnings that fell short of analysts' expectations. The retailer said higher costs ate up much of a 12.5 percent increase in sales.

Amgen rose less than 1 percent after it said it plans to spend about $5 billion on buying back its stock from investors. The drugmaker expects to acquire more than 9 percent of its outstanding stock.

DemandTec Inc. jumped 55 percent on news that International Business Machines Corp. plans to buy the software company for $440 million in cash. DemandTec's software helps businesses set prices for products they sell.

MEMC Electronic Materials Inc. jumped 1.2 percent. The solar energy company said it would eliminate 20 percent of its workforce and cut other costs.

The stock market's drop came despite new figures showing that the number of people applying for unemployment benefits fell last week to the lowest level in nine months.

Hope that European leaders would resolve the crisis and signs that the US would avoid falling into another recession has pushed the Dow up 14 percent since it hit a low for the year Oct. 3.