Stocks plunged Thursday, with the Dow Jones industrial average down more than 400 points, amid speculation that European banks lack sufficient capital and growing signs the economy is slowing.
The Dow closed down 419.63, or 3.68%, at 10,990.58; the S&P 500 fell 53.24, or 4.46%, ending at 1,140.65; and the Nasdaq composite closed down 131.05, or 5.22%, at 2,380.43
All numbers are preliminary.
The STOXX Europe 600 index lost 4.8% in its worst plunge since March 2009 and Germany's DAX index slid 5.8%, the most since 2008.
Ten-year Treasury yields fell as much as 19 basis points to 1.97% as rates on similar-maturity Canadian and British debt also reached all-time lows. The dollar gained against 15 of 16 major peers, climbing 0.6% to $1.4339 per euro.
Banks led losses a day after the European Central Bank said a lender will borrow dollars for the first time in six months. Morgan Stanley cut its forecast for global economic growth this year to 3.9% from 4.2%, citing insufficient policy response to Europe's debt crisis and weakening confidence.
U.S. initial jobless claims climbed by 9,000 to 408,000 in the week ended Aug. 13, according to the Labor Department.
“The massive exodus from risk markets reflects heightened concerns with a possible recession and the accelerated loss of trust in policymakers,” Mohamed El-Erian, CEO and co-chief investment officer at Pacific Investment Management Co., wrote in an e-mail. “Importantly, such worries will now be compounded by concerns about technical damage to key markets. The risk is of a rapidly deteriorating negative feedback loop of weakening fundamentals, inadequate policies and bad technicals.”
Financial shares in the S&P 500 lost as much as 5.8% as a group Thursday.
All 10 industry groups in the S&P 500 retreated at least 2%, led by companies most tied to the economy including commodity producers, banks and manufacturers.
“It's ugly out there,” Paul Zemsky, head of asset allocation for ING Investment Management, said in a telephone interview. His firm oversees $550 billion. “It's a combination of concern of a potential recession and the lack of policy tools to fight it. Until people see a bottom, they are not going to buy stocks. There will be pressure on the equity market until we see a solid policy response.”