U.S. stocks sink on global worries

U.S. Treasuries rallied, with the 10-year yield hitting a record low. Worries about a slowdown in global growth weighed down commodities, with copper, oil and silver prices sinking.

The selling started early, with world markets logging steep declines, following the Federal Reserve’s gloomy outlook and weak manufacturing data from China.

Adding further pressure to U.S. markets was the latest jobless claims report, which was worse than expected.

The Dow Jones industrial average (INDU) tumbled 316 points, or 2.9%, with all 30 of the blue chip index’s 30 components in the red, with United Technologies (UTX, Fortune 500), Alcoa (AA, Fortune 500) and Caterpillar (CAT, Fortune 500) taking the sharpest nosedives.

The Dow 30

The S&P 500 (SPX) lost 30 points, or 2.6%, with only eight of its components showing gains. The Nasdaq (COMP) dropped 56 points, or 2.2%.

Financial stocks were among the worst performers in the early going, with Bank of America (BAC, Fortune 500) dropping 2.5%. JPMorgan Chase (JPM, Fortune 500) and Goldman Sachs (GS, Fortune 500) were down 3.2% and 2.9% in early trading. Wells Fargo (WFC, Fortune 500) fell 1.8%, while shares of Citigroup (C, Fortune 500) tumbled 2.7%.

The sell-off came a day after Moody’s downgraded Bank of America, Citigroup and Wells Fargo.

U.S. stocks ended sharply lower Wednesday, after the Fed said it will shift $400 billion from short-term Treasuries into long-term Treasuries in an effort to boost lending and spur the economy.

While the so-called Operation Twist was what investors had been anticipating, meeting expectations just wasn’t enough.

“These measures can’t make the economy worse, but neither, we think, will they make things much better,” said High Frequency Economics chief U.S. economist Ian Shepherdson in a note to clients.

Treasuries already twisting

As investors fled the global stock markets, they rushed for safer havens, driving up the price on the benchmark 10-year U.S. Treasury. That pushed the yield down to a fresh record low below 1.762% from 1.88% late Wednesday.

Commodities and currencies: Copper, oil and silver prices dropped 4.4%, 7.1% and 9.5% respectively

The dollar moved higher against the euro and the British pound, but was slightly lower versus the Japanese yen.

Economy: The Fed’s latest assessment of the economy also spooked investors. Though the central bank has been warning of slower growth for months, its signal of “significant downside risks to the economic outlook, including strains in global financial markets” added to the pessimistic forecast.

A preliminary reading on China’s manufacturing activity fell in September, according to HSBC’s survey, renewing concerns of a sudden slowdown in the world’s second-largest economy.

A separate report showed that manufacturing in the eurozone contracted for the first time in over two years, according to London-based Markit Economics.

The reading “provides the strongest sign yet that the region is on the cusp of recession,” said Capital Economics European economist Ben May in a research note.

Meanwhile, the U.S. Labor Department issued its weekly jobless claims data ahead of the opening bell. The number of unemployed filing for first time benefits came in at a higher-than-expected 423,000 in the latest week.

The Conference Board’s index of leading economic indicators rose 0.3% in August, higher than expected, after having climbed 0.5% in July.

World markets: European stocks were deep in the red in midday trading. Britain’s FTSE 100 (UKX) sank 4.6%, while France’s CAC 40 (CAC40) fell 4.8% and the DAX (DAX) in Germany dropped 4.5%.

Asian markets ended sharply lower. The Shanghai Composite (SHCOMP) finished 2.8% lower, the Hang Seng (HSI) in Hong Kong plunged 4.9% and Japan’s Nikkei (N225) fell 2.1%.

Companies: Shares of Goodrich (GR, Fortune 500) spiked 10.3% in morning trading after United Technologies (UTX, Fortune 500) agreed to buy the aircraft parts maker for $16.5 billion.

Shares of Hewlett-Packard (HPQ, Fortune 500) fell 1.3% by mid morning as investors anticipate a management shakeup. HP’s shares soared almost 7% Wednesday on news that the company’s board is considering replacing current CEO Leo Apotheker after barely a year on the job with former eBay boss Meg Whitman.

FedEx (FDX, Fortune 500) shares were down roughly 6.8% after the company lowered its guidance when it reported quarterly results Thursday. The company cited the slowing global economy and higher fuel prices.

Nike (NKE, Fortune 500) will report results after the close.

 


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