Worries over the potential impact of the euro zone on the global economy sent US stocks tumbling on Thursday into the first correction of the bull market that began in March 2009. Bank of America, Alcoa and General Electric were among the stocks caught in the market's downdraft.
The Dow Jones Industrial Average fell 376.36 points (3.60%) to 10,068.01, the measure's biggest point drop since Feb. 10, 2009, and largest percentage drop since March 5, 2009. The Dow is now at its lowest point since Feb. 10 of this year, and is in negative territory for the year, down 3.45%.
In addition, the Dow is off 10.15% from its 2010 closing high hit on April 26, meeting the technical definition for a correction. The last 10% correction from a peak was in November 2007, a decline from the Dow's Oct. 9, 2007, record of 14,164.53. The Dow is now down 28.92% from that record.
All of the Dow's 30 components ended in the red on Thursday. Bank of America was its worst performer with a tumble of $1.01 (6.2%) to $15.30. The financial sector was hurt not only by the broad worries over the potential fallout of Europe's debt woes but also by the prospect of a financial regulatory overhaul bill clearing the US Senate. JP Morgan Chase dropped $1.55 (3.9%) to $37.83.
Aluminium giant Alcoa was also weak, hurt by a drop in commodities. It fell 71 cents (6%) to $11.07. Meanwhile, conglomerate General Electric slid $1 (5.8%) to $16.26.
The Nasdaq Composite declined 94.36 (4.11%) to 2,204.01, its biggest point drop since Dec. 1, 2008, and biggest percentage decline since Feb. 17, 2009. At its lowest close since Feb. 12 of this year, the measure is now down 2.87% for the year to date. The Nasdaq is also down 12.89% from its 2010 closing high on April 23, marking the second time it closed at correction territory this year. The first came on May 7, the day after the flash crash.
The Standard & Poor's 500 index dropped 43.46 points (3.90%) to 1,071.59, its biggest point drop since Jan. 20, 2009, and biggest percentage drop since April 20, 2009. The measure closed at its lowest level since Feb. 10 of this year, and is now down 3.9% for the year.
The S&P 500 is also off 11.97% from its 2010 closing high on April 23. The last 10% correction from a peak was in November 2007, a decline from the S&P 500's Oct. 9, 2007, peak at 1,565.15. It is now down 31.53% from that record close.
Just three of the S&P 500's components ended the session in positive territory on Thursday: MasterCard, which climbed $3.05 (1.5%) to $205.50; Ross Stores, which rose 55 cents (1.1%) to $52.27; and TJX Cos., which edged up 25 cents (0.6%) to $43.44.
The rise in MasterCard came after the failure of a proposal by Sen. Sheldon Whitehouse (D., R.I.) that would have allowed individual states to impose interest-rate caps on credit cards and other lending by out-of-state banks.
In economic news, in a troubling sign for the US labour market, the number of workers filing new claims for unemployment benefits unexpectedly surged to 471,000 in the week ended May 15, wiping out most of the recent declines. Economists were expecting a decline to 440,000.
Sharply lower building permits caused the Conference Board's index of leading economic indicators to fall for the first time since March 2009, dipping 0.1% last month after a revised 1.3% the month before. Economists had expected a 0.2% increase in April.
At 7:45 AM (AEST), the 10-year Treasury note yield was 3.21% and the five year yield was 1.98%.
European shares ended sharply lower on Thursday as investors continued to dump equities and other risky assets amid worries over divisions within Europe over how to handle the euro zone's sovereign debt crisis.
After rising as high as 246.16 early in the session, the Stoxx Europe 600 index fell 2.2% to close at 238.28.
Much of the current nervousness in markets has been triggered by investors worried about default in peripheral European countries.
Germany's go-it-alone decision to ban "naked" short selling on Wednesday didn't do much to convince investors that European leaders are taking a united stand to tackle the region's debt problems.
Of the main benchmark equity indexes, the German DAX index fell 2% to close at 5,867.88, the French CAC-40 index lost 2.3% to end at 3,432.52 and the UK's FTSE 100 index settled 1.6% lower at 5,073.13.
Safe-haven flows drove down yields on 10-year German government bunds and British gilts.
While the 10-year bund yield dropped around 7 basis points to 2.69%, commodity futures fell.
The drop in commodity futures slammed miners, with the sector down 4.2% as BHP Billiton shares fell 3.3% and Randgold Resources shares lost 1.7%.
Xstrata fell 4.3%, while Rio Tinto declined 5.8% and Vedanta lost 3.7%. Shares of Kazakhmys fell 4.3%.
Banks rallied early on Thursday but couldn't hold onto gains in the afternoon, with BNP Paribas shares down 1.1% and UniCredit down 3%. BBVA shares fell 2.6%.
Elsewhere, British Airways fell 3.2% after an appeals court overturned an injunction against a planned cabin-crew strike.
Several Asian stock markets hit their multi-month lows as sentiment remained weak amid ongoing worries over euro-zone debt and the sunken South Korean warship.
Japan's Nikkei Stock Average fell 1.5%, ending at its weakest level in more than three months. China's Shanghai Composite dropped 1.2% to close at its lowest level in more than a year, while Hong Kong's Hang Seng Index fell 0.2%.
New Zealand shares ended slightly lower, weighed down by losses on offshore bourses, but outperformed other markets as investors took heart from tax cuts and a better economic outlook contained in the government's budget. The NZX-50 ended down 0.3%, or 10 points, at 3,111.42.
Base metals on the LME finished mixed. Aluminium fell $20 (1.00%) to $1,990 while copper rose $10 (0.15%) to $6,570 and nickel weakened $240 (1.12%) to $21,160. Zinc dropped $10 (0.53%) to $1,870 and lead shed $20 (1.14%) to $1,740. Comex copper was last quoted at 294.55 US cents per pound.
Gold pared its loss into the open-outcry close, faring better than other metals as it retains some safe-haven lustre. Investors used several intraday retreats as buying opportunities. Spot gold was last quoted at $1,181.25. Comex gold futures slid $4.50 (0.38%) to $1,188.60. Spot silver was last quoted at $17.59.
Crude ended lower on Thursday, slammed by concerns about an oil glut in the US Midwest and the possibility of a European economic slowdown. West Texas Intermediate was last quoted at US$68.01 per barrel.
At 07:45 a.m. (AET) the US dollar was quoted at 0.8027 euros, 89.08 yen, 1.239 AUD and 69.72 pence.
As for Ross Stores, it posted a 56% jump in fiscal first-quarter profit, driven by strong sales gains and higher margins. The results also helped lift rival TJX.
The declines elsewhere came as the market grew increasingly concerned about the ultimate impact on the global economy if the euro zone continues to weaken because of debt.
Advance Auto Parts climbed $2.90 (6.3%) to $48.99. The auto-parts retailer's fiscal first-quarter profit grew 17% on higher same-store sales and improved margins.
Sears Holdings slid $10.86 (11%) to $88.70. The retailer's fiscal first-quarter earnings dropped 39%, as sales were nearly flat and the company's domestic unit stepped up promotions of appliances and home electronics.
American depositary shares of Bank of Ireland tumbled $1.26 (18%) to $5.70, after the Irish banking giant said the minimum conversion price under its debt for equity offer has been determined at EUR0.851103, a 25% discount to the closing price on April 23, adjusted by the rights issue factor.
Autodesk sank $2.07 (6.8%) to $28.28. The design-software company's fiscal-first quarter report showed demand for its products broadly improved, but revenue fell in its Americas region.
Dollar Tree rose $2.01 (3.4%) to $61.68. The dollar-store operator's fiscal first-quarter earnings rose 5.3% despite inventory-related charges as same-store sales grew and new stores added to revenue. The company also boosted its earnings view for the year.