NEW YORK — Fear drove Wall Street to one of its most dramatic, dizzying days in years on Wednesday.
NEW YORK — Fear drove Wall Street to one of its most dramatic, dizzying days in years on Wednesday.
Investors fled stocks and poured into bonds as worries about a global economic slowdown intensified. The Dow Jones industrial average dropped 460 points in afternoon trading, all three U.S. stock indexes were in negative territory for the year, and the so-called fear index spiked.
A late recovery limited the damage and left stocks mostly lower. But investors were shaken after the heaviest day of trading in more than three years.
“I think it’s fair to call it a global growth scare right now,” said Bill Stone, chief investment strategist at PNC Asset Management.
Investor concerns of a worldwide economic slowdown turned into outright fear after weeks of turbulence. Germany, Europe’s biggest economy, is struggling. China’s economy appears to be slowing. A batch of worrisome economic news in the U.S. also fueled the selling.
Traders sold riskier investments and moved money into U.S. government bonds, gold and cash.
By the end of the day, the Dow Jones industrial average lost 173.45 points, or 1 percent, to 16,141.74. The Standard &Poor’s 500 index fell 15.21 points, or 0.8 percent, to 1,862.49 and the Nasdaq composite dropped 11.85 points, or 0.3 percent, to 4,215.32.
The relatively modest declines, however, masked what was a frightening ride for investors. At one point, the Nasdaq flirted with a correction, which happens when a benchmark index closes 10 percent or more below a recent peak.
Wall Street’s so-called “fear index” also kept rising. The Chicago Board Options Exchange’s volatility index, known as the VIX, has more than doubled over the past month: from 12 in September to 26 on Wednesday.
Government bonds also reflected deep anxiety among investors. The yield on the benchmark U.S. 10-year note slumped from 2.20 percent to below 1.91 percent in early trading Wednesday, a move of 29 basis points. As bond prices rise, yields drop.
“It typically takes weeks for 10-year Treasurys to move 29 basis points,” or 0.29 percentage points, noted Tom di Galoma, head of fixed income rates in New York at ED&F Man Capital. “Today it moved 29 basis points in 5 minutes.”
By the end of the day, the 10-year pulled back to a yield of 2.14 percent.