U.S. Stocks Plummet, Erasing Gains for the Year: Markets Wrap
(Bloomberg) –U.S. stocks plunged, sending the Dow Jones Industrial Average down almost 1,600 points, as major averages erased gains for the year. Treasuries rallied and gold rose on haven demand.
Equity selling accelerated shortly after 3 p.m. in New York, with the Dow sinking more than 800 points in a matter of 10 minutes only to snap back 10 minutes later. The index remained lower by 4 percent, or 1,000 points — its steepest drop since Aug. 24, 2015. The S&P 500 Index traced a similar trajectory, though its decline stood at 3 percent. Both are now lower for the year. The Cboe Volatility Index more than doubled to its highest level in 2 1/2 years.
“This is classic risk off that may not end any time soon,” says Win Thin, head of emerging-market currency strategy at Brown Brothers Harriman.
Treasuries popped, sending the 10-year yield down more than 10 basis points, and gold future pushed higher. The dollar stabilized while the yen advanced.
While Friday’s market rout came amid U.S. wage data on Friday that pointed to quickening inflation, which would lead to higher rates and, in turn, rising borrowing costs for companies, the selling Monday came amid few major data points.
“I think sentiment was a little too optimistic,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “What was driving the market up in January? It wasn’t the fundamentals, as good as they were, it was excessive confidence.”
Elsewhere, oil extended declines after U.S. explorers raised the number of rigs drilling for crude to the most since August. Copper climbed the most in a week. Bitcoin slid below $7,000.
These are the main moves in markets:
The S&P 500 fell 2.6 percent as of 3:26 p.m. New York time. The Dow fell 836.12 points, or 3.2 percent, while the Nasdaq averages were off by 2 percent. The Stoxx Europe 600 Index declined 1.6 percent , hitting the lowest in almost 12 weeks with its sixth consecutive decline. The MSCI Emerging Markets Index lost 1.9 percent.
The Bloomberg Dollar Spot Index gained 0.3 percent. The euro decreased 0.5 percent to $1.2405. The British pound declined 0.8 percent to $1.4001, the weakest in almost two weeks. The Japanese yen gained 0.3 percent to 109.79 per dollar.
The yield on 10-year Treasuries fell four basis points to 2.81 percent. Germany’s 10-year yield declined three basis points to 0.74 percent, the largest decrease in almost six weeks. Britain’s 10-year yield declined two basis points to 1.558 percent.
West Texas Intermediate crude dipped 2.2 percent to $64.01 a barrel. Gold advanced 0.1 percent to $1,334.76 an ounce. Copper gained 1.8 percent to $7,169 per metric ton.