Dow nosedives 1,175 points, the worst day for stocks since 2011

Health care, technology, and industrial companies all took outsize losses and energy companies sank with oil prices. Analysts say after big market gains in 2017 stocks were overdue for a drop.

|
Richard Drew/AP
Trader Tommy Kalikas works on the floor of the New York Stock Exchange on Feb. 5, 2018. Stock markets around the world took another pummeling Monday as investors continued to fret over rising US bond yields.

The Dow Jones industrial average plunged more than 1,100 points Monday as stocks took their worst loss in six and a half years. Two days of steep losses have erased the market's gains from the start of this year and ended a period of record-setting calm for stocks.

Banks fared the worst as bond yields and interest rates nosedived. Health care, technology and industrial companies all took outsize losses and energy companies sank with oil prices.

At its lowest ebb, the Dow was down 1,597 points from Friday's close. That came during a 15-minute stretch where the 30-stock index lost 700 points and then gained them back.

Market pros have been predicting a pullback for some time, noting that declines of 10 percent or more are common during bull markets. There hasn't been one in two years, and by many measures stocks had been looking expensive.

"It's like a kid at a child's party who, after an afternoon of cake and ice cream, eats one more cookie and that puts them over the edge," said David Kelly, the chief global strategist for JPMorgan Asset Management.

Kelly said the signs of inflation and rising rates are not as bad as they looked, but after the market's big gains in 2017 and early 2018, stocks were overdue for a drop.

The Dow finished down 1,175.21 points, or 4.6 percent, at 24,345.75.

The Standard & Poor's 500 index, the benchmark most professional investors and many index funds use, skidded 113.19 points, or 4.1 percent, to 2,648.94. That was its biggest loss since August 2011, when investors were fearful about European government debt and the United States came close to breaching its debt ceiling.

The Nasdaq composite fell 273.42 points, or 3.8 percent, to 6,967.53. The Russell 2000 index of smaller-company stocks sank 56.18 points, or 3.6 percent, for 1,491.09.

The slump began on Friday as investors worried that creeping signs of higher inflation and interest rates could derail the US economy along with the market's record-setting rally. Energy companies, banks, and industrial firms are taking some of the worst losses.

The S&P 500 has fallen 7.8 percent since Jan. 26, when it set its latest record high. Investors are worried about evidence of rising inflation in the US. Increased inflation might push the Federal Reserve to raise interest rates more quickly, which could slow down economic growth by making it make it more expensive for people and businesses to borrow money. And bond yields haven't been this high in years. That's making bonds more appealing to investors compared with stocks.

The stock market has been unusually calm for more than a year. The combination of economic growth in the US and other major economies, low interest rates, and support from central banks meant stocks could keep rising steadily without a lot of bumps along the way. Experts have been warning that that wouldn't last forever.

As bad as Monday's drop is, the market saw worse days during the financial crisis. The Dow's 777-point plunge in September 2008 was equivalent to 7 percent, far bigger than Monday's decline.

Stocks hadn't suffered a 5 percent drop since the two days after Britain voted to leave the European Union in June 2016. They recovered those losses within days.

The last 10 percent drop for markets came in early 2016, when oil prices were plunging as investors worried about a drop in global growth, which could have sharply reduced demand. US crude hit a low of about $26 a barrel in February of that year. A drop of 10 percent from a peak is referred to on Wall Street as a "correction."

Wells Fargo sank $5.91, or 9.2 percent, to $58.16. Late Friday the Fed said it will freeze Wells Fargo's assets at the level where they stood at the end of last year until it can demonstrate improved internal controls. The San Francisco bank also agreed to remove four directors from its board.

Benchmark US crude oil fell $1.30, or 2 percent, to $64.15 a barrel in New York. Brent crude, the standard for international oil prices, lost 96 cents, or 1.4 percent, to $67.62 a barrel in London.

Bond prices tumbled after moving sharply higher on Friday. The yield on the 10-year Treasury slipped to 2.73 percent from 2.84 percent. That hurt banks by sending interest rates lower, which means banks can't charge as much money for mortgages and other types of loans.

The dollar fell to 109.70 yen from 110.28 yen. The euro slipped to $1.2399 from $1.2451.

Gold declined 80 cents to $1,336.50 an ounce. Silver dipped 4 cents to $16.67 an ounce. Copper rose 3 cents to $3.22 a pound.
Stocks in Europe also fell. Leading political parties in Germany, which is the largest economy in Europe, have struggled to form a government. Chancellor Angela Merkel's conservative Union bloc and the center-left Social Democrats are still in talks about extending their alliance of the past four years.

Britain's FTSE 100 lost 1.5 percent while France's CAC 40 slid 1.5 percent. The DAX in Germany shed 0.8 percent.
Japan's benchmark Nikkei 225 tumbled 2.6 percent and the South Korean Kospi shed 1.3 percent. Hong Kong's Hang Seng index sank 1.1 percent.

This story was reported by The Associated Press.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Dow nosedives 1,175 points, the worst day for stocks since 2011
Read this article in
https://www.csmonitor.com/USA/2018/0205/Dow-nosedives-1-175-points-the-worst-day-for-stocks-since-2011
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe