Investors fled Wall Street yesterday in the worst stock-market selloff since the depths of the recession in early 2009, in what has turned into a full-fledged correction.
The Dow and the S&P tumbled more than four per cent and the Nasdaq lost five per cent on fears that the US is staring at another recession and that Europe’s sovereign debt crisis is swallowing two of its largest economies.
Analysts predicted further losses even though stocks have fallen on nine of the last ten days. Two-year Treasury yields fell to a record low as investors sought safety in short-term government bonds.
“People are throwing in the towel because they can’t find relief on any front,” said Milton Ezrati, market strategist at Lord Abbett in Jersey City, New Jersey, which manages $110bn (£67bn) in assets.
The S&P 500’s drop puts it more than ten per cent below its April 29 high, considered a correction.
More than 13bn shares changed hands, the busiest trading day in more than a year. Decliners beat advancers on the New York Stock Exchange by about 19 to 1.
The market’s recent malaise stems from a number of factors. US economic data has worsened, suggesting slowing growth from already sluggish pace in the first half. Europe’s sovereign debt crisis has defied remedies and threatens to engulf large eurozone economies Spain and Italy.
“The debt troubles in Europe, especially with the yields on Italian and Spanish government bonds soaring, are making investors gather as much liquidity as possible,” said Stephen Massocca, managing director of Wedbush Morgan in San Francisco.
The Dow Jones industrial average was down 512.46 points, or 4.31 per cent, at 11,383.98. The Standard & Poor's 500 Index fell 60.21 points, or 4.78 per cent, at 1,200.13. The Nasdaq Composite Index lost 136.68 points, or 5.08 per cent, at 2,556.39.
Losses occurred in all sectors. Among stocks hitting new 52-week lows were Bank of America, down 7.4 per cent at $8.83, Citigroup, down 6.6 per cent at $34.81, and Hewlett-Packard, down 5.1 per cent at $32.54.
Among sectors, losses in energy and materials outpaced others, with S&P energy down 6.8 per cent and materials down more than 6.6 per cent. US crude futures settled down $5.30 to $86.63 a barrel in New York.
The CBOE Volatility index jumped 35.4 per cent to 31.66, its highest since July 2010. It was the biggest rise since February 2007.