Global stocks on Thursday echoed the worst days of the financial crisis, with nervousness over the health of the global economy and the European debt crisis sending stocks to their worst one-day dip in years and putting U.S. indexes into correction territory.
The Dow Jones industrial average closed at 11,383.68, down 512.76 points or 4.3 per cent. The broader S&P 500 closed at 1200.07, down 60.27 points or 4.8 per cent. In Canada, the S&P/TSX composite index closed at 12,380.13, down 435.90 points or 3.4 per cent.
For the Dow, Thursday's retreat marked its biggest percentage decline since Feb. 10, 2009, about a month before major indexes finally bottomed out at 12-year lows. In terms of points, though, the Dow hasn't fallen more than 500 points since December, 2008, when the bear market was in full-bloom.
The retreat was widespread, affecting all 30 stocks within the Dow. Only three stocks within the S&P 500 saw gains: Motorola Mobility Holdings, Vulcan Materials and PG&E Corp. Kraft Foods Inc., which had been up for most of the day on enthusiasm over the company's decision to split itself into two publicly traded companies, gave in to the selling pressure. It ended the day down 1.5 per cent.
The losses put the S&P 500 down 12 per cent from its recent high at the end of April, conforming to the general definition of a stock market correction. However, the index did suffer a more severe setback last summer.
Now, some of the same issues that had weighed on stocks in 2010 have returned. High bond yields in Italy and Spain have fed concerns that the debt crisis has spread beyond Greece. These concerns were expressed by no less an authority than the European Central Bank, which announced anti-crisis measures on Thursday to keep money flowing to banks and buy distressed bonds.
As well, investors remain nervous about the U.S. economy following recent disappointing reports on economic growth in the second quarter and worse-than-expected readings on manufacturing and non-manufacturing activity in July, raising fears that the economy is sliding into another recession. The Labor Department will release its payrolls report on Friday morning.
Commodities were hit hard during the selloff. In particular, crude oil fell to $86.63 (U.S.) a barrel, down $5.30. That hit Canada's energy-heavy TSX hard, with Suncor Energy Inc. tumbling 4.4 per cent.
For safety, investors turned to the U.S. dollar and U.S. government bonds. The U.S. dollar index rose 1.7 per cent, while the yield on the 10-year U.S. Treasury bond, which moves in the opposite direction to price, fell to 2.42 per cent – its lowest level since October.
Meanwhile, gold fell to $1,659 an ounce, down $7.30 – the victim of a rising U.S. dollar and perhaps margin calls.
David Berman