Local stocks:
Wells Fargo is among the hardest-hit large Bay Area companies, though none fared particularly well.
The U.S. stock market swung wildly on Monday, with by far the biggest single-day drop in the history of the Dow Jones industrial average — at one stage down 1,597 points from Friday’s close. The Dow finished down 4.6 percent, at 24,345.75, wiping out its gains for the year.
By percentage, however, it was more like a 5.5 earthquake than a Loma Prieta. It was the worst loss in 6½ years, but nowhere near the top 20 of all time. On a Monday in October 1987, the Dow fell 508 points — but that was nearly 23 percent of its value.
Wells Fargo was among the Bay Area stocks hit the hardest, falling 9.2 percent to $58.16. But the drop also followed news that the Fed will freeze the San Francisco bank’s assets at the level where they stood at the end of last year until it can demonstrate improved internal controls.
Of the other big local stocks, Apple fared about the best, but it still fell 2.5 percent. Salesforce lost 2.8 percent; Intel 3.5 percent; Visa, Oracle and Gilead close to 4 percent; Alphabet, Chevron, Cisco Systems, Facebook, Netflix and Pacific Biosciences all dropped about 5 percent. Nvidia fell 8.5 percent.
Banks fared the worst as bond yields and interest rates nose-dived. Health care, technology and industrial companies all took outsize losses, and energy companies sank with oil prices.
Market pros have been predicting a pullback for some time, noting that declines of 10 percent or more are common during bull markets. There hasn’t been one in two years, and by many measures stocks had been looking expensive.
“It’s like a kid at a child’s party who, after an afternoon of cake and ice cream, eats one more cookie and that puts them over the edge,” said David Kelly, the chief global strategist for JPMorgan Asset Management.
Kelly said the signs of inflation and rising rates are not as bad as they looked, but after the market’s big gains in 2017 and early 2018, stocks were overdue for a drop.
The Standard & Poor’s 500 index, the
benchmark most professional investors and many index funds use, skidded 4.1 percent to 2,648.94. That was its biggest loss since August 2011, when investors were fearful about European government debt and the U.S. came close to breaching its debt ceiling.
The Nasdaq composite fell 3.8 percent to 6,967.53. The Russell 2000 index of smallercompany stocks sank 3.6 percent to 1,491.09.
The markets’ slump began on Friday as investors worried that creeping signs of higher inflation and interest rates could derail the U.S. economy along with the market’s recordsetting rally. Energy companies, banks, and industrial firms are taking some of the worst losses.
The S&P 500 has fallen 7.8 percent since Jan. 26, when it set its latest record high. Investors are worried about evidence of rising inflation in the U.S. Increased inflation might push the Federal Reserve to raise interest rates more quickly, which could slow down economic growth by making it make it more expensive for people and businesses to borrow money. And bond yields haven’t been this high in years. That’s making bonds more appealing to investors compared with stocks.
The stock market has been unusually calm for more than a year. The combination of economic growth in the U.S. and other major economies, low interest rates, and support from central banks meant stocks could keep rising steadily without a lot of bumps along the way. Experts have been warning that that wouldn’t last forever.
A rocky patch for the markets could become awkward for President Trump. He has repeatedly claimed credit for surging stocks, while business optimism over his push to cut taxes and lessen regulation has helped fuel the “Trump Bump.”
Trump’s habit of regularly boasting about stock market surges is a practice other presidents avoided. They knew that what goes up may go down again, and they did not want to take the blame for market forces beyond their control.
Stocks surged broadly during the president’s first year in office. By late January the S&P 500 was up 27 percent since Trump’s inauguration. But the last few days of trading cut that gain to just 17 percent, especially after the sharp declines on Monday.
As bad as Monday’s drop is, the market saw worse days during the financial crisis. The Dow’s 777-point plunge in September 2008 was equivalent to 7 percent, far bigger in percentage terms than Monday’s decline.
Stocks hadn’t suffered a 5 percent drop since the two days after Britain voted to leave the European Union in June 2016. They recovered those losses within days.
The time stocks dropped 10 percent — albeit over a period of days — came in early 2016, when oil prices were plunging as investors worried about a drop in global growth, which could have sharply reduced demand. U.S. crude hit a low of about $26 a barrel in February of that year. A drop of 10 percent from a peak is referred to on Wall Street as a “correction.”
Benchmark U.S. crude oil fell 2 percent on Monday to $64.15 a barrel in New York. Brent crude, the standard for international oil prices, lost 1.4 percent to $67.62 a barrel in London.
Bond prices tumbled after moving sharply higher on Friday. The yield on the 10-year Treasury slipped to 2.73 percent from 2.84 percent. That hurt banks by sending interest rates lower, which means banks can’t charge as much money for mortgages and other types of loans.
Stocks in Europe also fell. Britain’s FTSE 100 lost 1.5 percent while France’s CAC 40 slid 1.5 percent. The DAX in Germany shed 0.8 percent.
Japan’s benchmark Nikkei 225 tumbled 2.6 percent and the South Korean Kospi shed 1.3 percent. Hong Kong’s Hang Seng index sank 1.1 percent.
Gold declined 80 cents to $1,336.50 an ounce. Silver dipped 4 cents to $16.67 an ounce. Copper rose 3 cents to $3.22 a pound. And bitcoin tumbled for a fifth day, dropping below $7,000 for the first time since November and leading other digital tokens lower.