U.S. stocks fell dramatically at the start of trading on Wednesday morning as investors showed their concern over global economic growth, falling oil prices, and disappointing data on the U.S. consumer.
The Dow Jones industrial average fell as much as 370 points in early trading to hit an 8-month low before recovering some of its losses, lately down around just over 250 points, or 1.5%. The blue-chip index had already fallen by at least 100 points in four of the previous six trading days coming into Wednesday, a rough stretch that has left the Dow Jones down roughly 2.8% on the year.
The Nasdaq composite and the S&P 500 index also fell to start the day, briefly erasing the broad market’s gains for the year only a day after both indices managed to close trading with small gains. While all three indices have experienced several highly volatile weeks of trading recently, the Nasdaq and the S&P 500 remain up by 0.4% on the year. The benchmark S&P 500 has lost more than 7 percent since its Sept. 18 record closing high.
Wednesday’s sell-off was spurred by the increasingly bleak economic outlook in Europe, where France suffered its latest credit rating downgrade of the past week, while European markets have also fallen off on concerns over low inflation. France’s CAC index has dropped a whopping 2.9% on Wednesday, while London’s FTSE 100 is down 2.1% and Germany’s DAX has fallen roughly 2.4%.
Meanwhile, in the U.S., the Commerce Department’s report on September retail sales showed that consumer spending dipped more than expected that month. The 0.3% drop in sales came on the heels of August’s 0.6% increase. Jack Kleinhenz, the chief economist for the National Retail Federation, called the sales numbers “surprisingly weak,” despite low inflation and a decline in gasoline prices. Volatility in the marketplace could also be affecting consumer confidence, pushing down spending, Kleinhenz added. “Consumer moods appeared to be embracing the fact that the economic outlook had improved but it bears repeating that the consumer will continue to be impacted by volatility [stock market, ISIS, Russia/Ukraine and Ebola],” he said.
After Wednesday morning’s drop-off, the Chicago Board Options Exchange Volatility Index (VIX), often referred to as the fear index, is up by 12.9% on the day and the index has risen more than 60% so far this year.
Reuters contributed to this report.
