Disappointment at Mario Draghi’s statement on Eurozone quantitative easing spread across the Atlantic yesterday as the S&P 500 suffered its biggest drop since late September.
The European Central Bank move triggered a spike in the euro that caught investors by surprise, forcing them to shift positions that hit most asset classes.
At the same time, the CBOE Volatility index, the stock market’s fear gauge, jumped 13.8 per cent, closing at its highest since 17 November.
The Dow Jones industrial average fell 252.01 points, or 1.42 per cent, to 17,477.67, the S&P 500 lost 29.89 points, or 1.44 per cent, to 2,049.62 and the Nasdaq Composite dropped 85.70 points, or 1.67 per cent, to 5,037.53.
All 10 S&P 500 sectors fell in a second day of sharp losses for US stocks. Healthcare ended down 2.2 per cent, leading the day’s decline in the S&P 500, followed by energy , down two per cent.
“The biggest influence was the Draghi talk this morning; it didn’t satisfy the US markets,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.
Some of the selling was related to leveraged funds that were likely forced to close positions as volatility spiked. According to Bank of America research, these funds, which were heavily involved in the dramatic selloff in late August, have since returned to the level of leverage they had prior to that downturn.
Zafgen shares were down 5.1 per cent at $5.96 after the company said the US Food and Drug Administration was putting on complete hold a late-stage study testing its experimental obesity drug.