Wall Street was off more than 1 per cent on Thursday, pushing the S&P 500 and the Dow Jones industrial average down 10 per cent for the year, as investors jettisoned stocks and scurried toward safer shores.
All 10 S&P major sectors were in the red, led by financials, especially banks. The financial sector, already the worst performing S&P sector this year, dropped 2.71 per cent.
Federal Reserve Chair Janet Yellen stuck to her guns on her return to Capitol Hill on Thursday, saying a weakened global economy and steep slide in U.S. equity markets is tightening financial conditions faster than the Fed wants.
Ms. Yellen said the Fed is looking at negative interest rates in light of the monetary policy of some European countries. The Bank of Japan moved to negative rates late last month and Sweden on Thursday cut its main interest rate deeper into negative territory.
“At this point, it feels like the markets really do not like negative deposit rates,” said Josh Navarro, global investment specialist at J.P. Morgan Private Bank in New York. “We’re in a new normal where volatility is back,” Mr. Navarro said, adding that the market was also being driven by technical factors.
The Dow Jones industrial average was down 300.3 points, or 1.89 per cent, at 15,614.44.
The S&P 500 was down 29.18 points, or 1.58 per cent, at 1,822.68 and the Nasdaq Composite index was down 50.14 points, or 1.17 per cent, at 4,233.45.
Globally, stocks fell sharply. The dollar hit a 16-month low against the yen and investors bought gold and top-rated bonds. U.S. Treasury security yields plunged to levels not seen since 2012 in some cases. U.S. bank stocks, like their European peers, took a severe beating. The S&P 500 bank index was down 3.8 per cent, led by Bank of America’s 6.3 per cent fall. Boeing tumbled 10.5 per cent to $104.09 after a Bloomberg report said the U.S. SEC was probing the planemaker over costs and expected sale of two jetliners.
The stock was the biggest drag on the Dow, responsible for 68 points of the index’s 310 point decline.
At the other end of the Dow was Cisco, up 8.4 per cent at $24.41 after reporting a bigger-than-expected profit. The stock was the only gainer on the Dow and gave the biggest boost to the S&P 500 and the Nasdaq.
