US wipes out gains on economic fears
US stocks erased the year’s increases in the broadest sell-off in a month-and-a-half yesterday, as fears of sustained global economic stagnation caused investors to flee to safer assets.
All three major indexes posted their worst percentage drop since 16 July following the Federal Reserve’s bleaker assessment of the economy on Tuesday.
The Dow Jones industrial average was down 265.42 points, or 2.49 per cent, at 10,378.83. The Standard & Poor’s 500 Index was down 31.59 points, or 2.82 per cent, at 1,089.47. The Nasdaq Composite Index was down 68.54 points, or 3.01 per cent, at 2,208.63.
The Nasdaq was down 2.7 per cent for the year, while the S&P 500 was down 2.3 per cent and the Dow was down 0.5 per cent. The CBOE Volatility Index surged 13 per cent, suggesting investors see further choppiness in the market.
The US central bank said it would take steps to hold down borrowing costs. However, some traders questioned how effective these measures would be.
“Adding liquidity to the system by saying they would buy Treasuries isn’t helping the average man on the street,” said Robert Pavlik, chief market strategist at Banyan Partners. “This isn’t going to be creating jobs or helping the housing market.”
There were more than five times as many declining stocks as advancing ones on the New York Stock Exchange while on the Nasdaq, more than eight stocks fell for each that rose.
Only five of the S&P’s 500 stocks ended higher. All 10 major S&P sectors were down
more than one per cent, led lower by the industrials, down 3.9 per cent, and the financials, off 3.6 per cent. Diversified manufacturer 3M was the biggest drag on the Dow, off 3.5 per cent.
Among the Nasdaq’s top decliners was Cisco Systems, which fell 2 per cent to $23.73 during the session, then slumped a further 7.9 per cent to $21.85 in extended trading after the company reported weaker-than-expected revenues.
Volume was light, with about 8.52bn shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, well below last year’s estimated daily average.