Dow closes below 23K as sell-off continues

U.S. still on track to expand at fastest pace in 13 years despite swoon

NEW YORK » It was another miserable day on Wall Street as a series of big December plunges continued, putting stocks on track for their worst month in a decade.

The Dow Jones Industrial Average dropped 464 points Thursday, bringing its losses to more than 1,700 points since Friday.

The benchmark S& P 500 index has slumped 10.6 percent this month and is almost 16 percent be- low the peak it reached in late September.

The steady gains of this spring and summer now fell like a distant memory. As we’ve entered the fall, investors started to worry that global economic growth is cooling off and that the U.S. could slip into a recession in the next few years. The S&P 500 is on track for its first annual loss in a decade.

The technology stocks that have led the market in recent years are now dragging it down. The technology-heavy Nasdaq composite is now down 19.5 percent from the record high it reached in August.

The market swoon is coming even as the U. S. economy is on track to expand this year at the fastest pace in 13 years. Markets tend to move, however, on what investors anticipate will happen well into the future, so it’s not uncommon for stocks to sink even when the economy is humming along.

Right now, markets are concerned about the potential for a slowing economy and two threats that could make the situation worse: the ongoing trade dispute between the U.S. and China, which has lasted most of this year, and rising interest rates, which act as a brake on economic growth by making it more expensive for businesses and individuals to borvrow money.

The selling in the last two days

came after the Federal Reserve raised interest rates for the fourth time this year and signaled it was likely to continue raising rates next year, although at a slower rate than it previously forecast.

Treasury Secretary Steven Mnuchin said the market’s reaction to the Fed was “completely overblown.”

Investors have responded to a weakening outlook for the U. S. economy by selling stocks and buying ultra-safe U.S. government bonds. The bondbuying has the effect of sending long- term bond yields lower, which reduces interest rates on mortgages and other kinds of longterm loans. That’s generally good for the economy.

At the same time, the reduced bond yields can send a negative signal on the economy. Sharp drops in long-term bond yields are often seen as precursors to recessions.

The S&P 500 index skidded 39.54 points, or 1.6 percent, to 2,467.42. The Dow fell 464.06 points, or 2 percent, to 22,859.60 after sinking as much as 679.

The Nasdaq fell 108.42 points, or 1.6 percent, to 6,528.41. The Russell 2000 index of smaller companies dropped another 23.23 points, or 1.7 percent, to 1,326.

Smaller company stocks have been crushed during the recent market slump because slower growth in the U. S. will have an outsize effect on their profits. Relative to their size, they also tend to carry more debt than larger companies, which could be a problem in a slower economy with higher interest rates.

The Russell 2000 is down almost 24 percent from the peak it reached in late August and it’s down 13.6 percent for the year to date. The S&P 500, which tracks larger companies, is down 7.7 percent.

The possibility of a partial shutdown of the federal government also loomed over the market on Thursday, as funding for the government runs out at midnight Friday. In general, shutdowns don’t affect the U.S. economy or the market much unless they stretch out for several weeks, which would delay paychecks for federal employees.