NEW YORK — Fears that the economy is stalling sent the Dow Jones industrial average down 280 points Wednesday, erasing more than a quarter of the stock market’s gains for the year.
Treasury-bond yields fell to their lowest level since December as traders put a higher value on safer investments.
The Dow dropped 279.65 points, or 2.2 percent, to 12,290.14. It was the biggest point drop since June 4 of last year and the largest percentage drop since August. The Standard & Poor’s 500 index lost 30.65, or 2.3 percent, to 1,314.55. The Nasdaq composite fell 66.11, or 2.3 percent, to 2,769.19.
The yield on the benchmark 10-year Treasury note fell to 2.96 percent. Bond yields fall when prices rise.
Doubts about the economy’s strength that built in May were compounded by weaker-than-expected reports on manufacturing and jobs.
“It looks like this recovery has hit its second ‘soft patch,’ which for a recovery that is less than 2 years old is troubling,” said Paul Ashworth, chief U.S. economist for Capital Economics.
The manufacturing and jobs reports, plus a decline in automobile sales in May, led several economists to lower their expectations for the year. JP Morgan was among a handful of investment banks that revised down its estimate for GDP growth in the second quarter to 2 percent. The downgrade followed one the bank issued last week.
“As far as we can tell, employers have hugely overreacted to the surge in oil prices, which has slowed but not killed consumption,” said Ian Shepherdson, chief U.S. economist for High Frequency Economics.
The weak numbers reported by payroll firm ADP pushed him to cut his forecast for overall job growth in May to 75,000. He earlier had forecast Friday’s report to show growth of 175,000 jobs.
Stock losses came across the market, with all 10 industry groups that make up the S&P 500 index losing more than 1 percent. Companies that have benefited from expectations of worldwide growth were hard hit. Caterpillar, Alcoa and Boeing all lost more than 3 percent.
Companies reporting results were not spared from the broad market drop. General Motors fell 5 percent after it said U.S. sales weakened in May. The carmaker sold 221,192 vehicles, down 1.2 percent from a year earlier. It cited a decision to cut sales to rental-car companies for the drop. Ford lost 4.6 percent after reporting similar declines.
Ashworth recalled that at the start of the year, analysts were enthusiastic about the economy’s prospects.
“At the very least,” he says, “the optimism is gone.”
