NEW YORK -- The Dow Jones industrial average plunged more than 334 points Thursday as a decline in energy stocks and worries about the global economy sent investors fleeing out of the market. It was the biggest point drop since June 2013.
It was also the third straight day investors have been taken on a roller-coaster ride. On Tuesday, the Dow fell 272 points, only to jump 275 points Wednesday. While 100-plus moves in the Dow have become more common as stocks have risen to record highs, 200-plus moves had been rare until this week. More than half of this year's 200-plus moves in points have happened in the past two weeks.
The VIX, a measure of volatility that is sometimes called Wall Street's "fear index," jumped 26 percent to its highest level since February.
"The violent gyrations are causing havoc for fund managers and active investors [who were] hoping for a smooth fourth quarter," said Todd Schoenberger of J. Streicher Asset Management.
After more than three years of the stock market moving quietly, steadily higher, volatility is back and in a big way, market observers said. The stock market hasn't seen day-to-day movements like this since August 2011, when Standard & Poor's downgraded the United States' credit rating. The S&P downgrade subsequently pushed the U.S. stock market into its last "correction," a technical term for when stocks fall 10 percent or more from a recent peak.
Stocks fell at the opening of trading Thursday, and the selling accelerated once European markets closed at midday Eastern time.
The Dow fell 334.97 points, or 2 percent, to 16,659.25. The Standard & Poor's 500 index lost 40.68 points, or 2.1 percent, to 1,928.21, and the Nasdaq composite fell 90.26 points, or 2 percent, to 4,378.34. More than 4.2 billion shares were traded.
Few companies were spared from the selling Thursday. All 30 members of the blue chip Dow index fell, and 482 of the 500 companies in the S&P 500 index ended the day lower.
Worries about the global economy, particularly in Europe and Asia, were once again center stage.
"Europe is struggling. Asia is struggling. Japan is struggling. The United States is the best house on the block at the moment," said Jurrien Timmer, director of global macroeconomics at Fidelity Investments.
European Central Bank President Mario Draghi said this week that there are signs the euro area's economic growth is slowing and policymakers must lift inflation from an "excessively low" level. Separately, a report by four economic institutes said Germany's economy is on the verge of recession. German exports sank 5.8 percent in August, the biggest monthly drop in five years.
Earlier in the week, the International Monetary Fund cut its outlook for this year and next for the global economy, citing weakness in Japan, Latin America and particularly Europe.
"The fear is that global interest rates are so low that there's risk of deflation, and the economic recovery, which has shown some steady progress, is now deteriorating," said Timothy Ghriskey, who helps oversee $1.5 billion as chief investment officer for Bedford Hills, N.Y.-based Solaris Asset Management LLC. "The news out of Europe is nothing new, but it's come to front and center now with Draghi's new comments."
A large part of Thursday's selling happened in energy stocks, particularly oil and coal companies. The price of oil fell sharply again Thursday, continuing its multiweek decline, on concerns that global oil production remains high despite signs that global demand is slowing.
Benchmark U.S. crude fell $1.54 to $85.77 a barrel on the New York Mercantile Exchange, a third straight decline of more than 1.5 percent. Oil is now 20 percent below its 2014 peak of $107.26 a barrel, reached in late June, technically pushing oil into a bear market.
Brent crude, an international benchmark used to price oil used by many U.S. refineries, fell $1.33 to $90.05 a barrel in London, at one point slipping below $90 for the first time since June 2012.
Sinking crude prices mean lower future profits for oil and gas companies, and investors responded accordingly. The energy sector of the S&P 500 fell nearly 4 percent, far more than the rest of the market. Exxon Mobil and Chevron, the nation's two largest oil and gas companies, each fell roughly 3 percent.
Wholesale gasoline futures fell 4.35 cents to $2.275 a gallon. The average price at the pump across the U.S. is $3.25, down 18 cents from a month ago. In other trading of energy futures on the New York Mercantile Exchange, heating oil fell 3.9 cents to $2.537 a gallon and natural gas slipped 1 cent to $3.845 per 1,000 cubic feet.
Coal stocks also took a beating after Morgan Stanley analysts downgraded the entire industry. Walter Energy slumped 11 percent and Peabody Energy fell 9 percent.
Traders say the market's volatility may ease once corporate earnings season gets fully underway. Aluminum company Alcoa reported its results Wednesday, which beat analysts' expectations, but the bulk of S&P 500 companies will not report for another week or so.
"We are in a phase of uncertainty until the big companies release their third-quarter figures," said Christian Zogg, who manages the equivalent of about $10 billion as head of equity and fixed income at LLB Asset Management AG in Vaduz, Liechtenstein. "The question in the U.S. is whether companies can keep their good margins."
Average investors who might be worried about the market's recent volatility should remain calm, Fidelity's Timmer said. The stock market has gone up for three straight years and the S&P 500 index is still up 4.3 percent this year.
"Just stick to your long-term [retirement] plan," Timmer said. "You don't want to sell at the bottom and buy at the top."
In other company news, shares of retailer The Gap Inc. dropped $5.23, or almost 13 percent, to $36.67. The clothing chain's chief executive officer, Glenn Murphy, announced he would step down in February. The news came as a surprise to investors, since Murphy is only 52 and was expected to continue in his role for several more years. Murphy was credited with helping Gap navigate the recession and restoring the company's appeal to younger customers.
Shares of Advanced Micro Devices, better known as AMD, fell 33 cents, or 10 percent, to $2.95. The chipmaker also announced a change in leadership, saying CEO and President Rory Read was stepping down. AMD has long struggled to keep its market share of the PC chip market against its main competitor, Intel.
With this week's volatility, investors moved into gold. The price of gold rose $19.30 to $1,225.30 an ounce. Silver rose 35 cents to $17.42 an ounce, and copper rose 3 cents to $3.03 a pound.
Information for this article was contributed by Ken Sweet of The Associated Press and by Oliver Renick, Callie Bost, Lu Wang, Joseph Ciolli and Inyoung Hwang of Bloomberg News.
Business on 10/10/2014