Stocks plunged Wednesday, sending the MSCI World index to its biggest drop since June, and Treasuries led a rally in government bonds on concern that the U.S. economic recovery is faltering. The dollar surged the most in 19 months against the euro.
The MSCI measure slid 2.9%, the biggest decline since June 29. The Dow Jones industrial average closed down 265.42, or 2.49%, at 10,378.83; the S&P 500 dropped 31.59, or 2.82%, closing at 1,089.47; and the Nasdaq composite fell 68.54, or 3.01%, to close at 2,208.63. The two-year Treasury yield fell as much as three basis points to a record low of 0.4892%. Gilts extended gains after the Bank of England cut its forecast for growth. The dollar gained up to 2.4%, the most since Jan. 6, 2009, to $1.2864 per euro. All numbers are preliminary.
The Federal Reserve’s statement Tuesday that the recovery is weakening and would require fresh stimulus was followed by an announcement that China’s industrial output rose the least in 11 months, adding to signs that the world’s third-biggest economy is slowing. The selloff Wednesday halted a rally in stocks that restored almost $4 trillion to global equity markets between July 5 and Tuesday.
“We’re in a worldwide soft patch and investors wonder why the Fed didn’t do more,” said James Swanson, chief investment strategist at MFS Investment Management, which oversees about $197 billion. “People are dumping stocks because they’re afraid earnings will decelerate and the economy is losing steam.”
