NEW YORK — Fear on Wednesday drove Wall Street to one of its most dramatic, nauseating days in years.
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. Greece, a key actor in Europe’ debt crisis three years ago, could see its government collapse next year, putting a crucial bailout program in danger. 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 lost 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 yield on the benchmark U.S. 10-year note fell from 2.20 percent to below 1.91 percent. By the end of the day, it pulled back to a yield of 2.14 percent. The yield on bonds moves in the opposite direction of prices.
“It typically takes weeks for 10-year Treasurys to move 29 basis 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.”
Investors have grown nervous of a stock market that had pushed ever higher, even in the face of a weakening global economy. The U.S. market also has not had a correction, a technical term for when a stock or index falls 10 percent or more, in more than three years. Historically a correction happens every 18 months.
