Dow cuts losses but closes down for fifth straight day
Stocks tumbled Thursday as the Dow fell for a fifth straight day but cut losses as the blue-chip index came back from a 400-point drop to close down 255 points.
Investors spooked by plunging bank stocks in Europe, a further slide in oil prices and angst over Federal Reserve interest rate policy dumped stocks and fled to the safety of havens such as U.S. government bonds and gold.
The Dow Jones industrial average dropped 1.6% to close at 15,660.18 after dropping as much 412 points. The Standard & Poor's 500 was off 22.78, or 1.2% to 1829.08. The Nasdaq composite index fell 16.76, or 0.4%, to 4266.84 and is in danger of falling into bear market territory. The tech-heavy index is now down 18.2% from its July 2015 peak of 5218.86.
The continued slide in stocks sent investors into major risk-off mode and in search of safe places to park their cash. Money piled into the 10-year U.S. Treasury note, briefly pushing the yield down as low as 1.53%, a fresh 52-week low. Gold, often viewed as a haven during periods of market turbulence, jumped 4.4%, or more than $50 an ounce to $1,247 an ounce.
The perfect storm working against markets picked up steam overnight, with bank stocks in Europe getting crushed again after a profit warnings from French bank Societe Generale sparked fresh fears about the health of Europe banks, struggling under the weight of weak growth, low interest rates and fears of rising bad debts. Adding to the angst was another swoon in oil prices, with U.S.-produced crude slipping another 2% and below the $27 per barrel mark to $26.85.
How bad will it get for the banks?
Wall Street was also digesting comments from Federal Reserve Chair Janet Yellen's two days of testimony before Congress, which were less dovish, or market-friendly, than market participants had hoped for. While Yellen noted that recent market turbulence and slowing growth could impede the U.S. economy, she said the Fed had still not seen much evidence of a negative feedback loop at home.
Wall Street interpreted that message as a sign that the Fed is still leaving rate hikes on the table for later this year, despite pretty much ruling out a rate hike at its March meeting.
Fed's Yellen cites growing risks to economy
The stock rout began across the pond in Europe, with the broad Stoxx Europe 600 falling 3.6%, and shares of the German DAX dropping 2.9% and the CAC 40 in Paris down 4%, due in large part to a big hit to banking stocks, which as a group were down nearly 6% across Europe.
Bank stocks in Europe suffered the brunt of the selling with French bank Societe Generale falling more than 12%, German financial institution Deutsche Bank dropping more than 7% and Swiss bank UBS dipping nearly 3%.