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 Major Wall Street stock indexes fell for the third straight week,
with the S&P 500 suffering its worst week since mid-2012, as selling
accelerating late in the day.
Investors fled to the safety of government debt, with the 30-year
Treasury bond's yield nearing the 3.0 percent level for the first
time since May 2013.
Money managers have scrambled to reduce big bets in stocks and other
risky assets as expectations for world economic growth have shifted
in recent days. A raft of weak indicators from Europe and China in
particular have collided with concerns about the U.S. Federal
Reserve's plans to reduce monetary stimulus.
"In a vacuum of policy response, investors are selling first and
asking questions later," said Jim McDonald, chief investment
strategist at Chicago-based Northern Trust Asset Management, which
has about $924 billion in assets under management.
"It smells like there is a high degree of involvement from
systematic traders, rather than fundamental traders. The magnitude
of the move has been disproportionate to the change in the
fundamentals," he said.
The Dow Jones industrial average <.DJI> fell 115.15 points, or 0.69
percent, to 16,544.1, the S&P 500 <.SPX> lost 22.08 points, or 1.15
percent, to 1,906.13 and the Nasdaq Composite <.IXIC> dropped 102.10
points, or 2.33 percent, to 4,276.24.
The MSCI all-country world index <.MIWD00000PUS> ended down 1.6
percent to hit its lowest level since February, while the
pan-European FTSEurofirst 300 <.FTEU3> index ended down more than
1.5 percent. The MSCI Emerging Markets Index <.MSCIEF> fell 1.8
percent.
In a sign of increased volatility, the CBOE Volatility Index <.VIX>,
or VIX, the market's favored gauge of Wall Street anxiety closed at
21.24, its highest level since December 2012, as more investors paid
up for protection against further declines. More than 27 million
contracts traded in the U.S. options market Friday, according to
Trade Alert data, the busiest day of the year.
Concerns about global growth and rising oil production hit oil
prices hard. Brent crude oil <LCOc1> fell to $89.62 a barrel, after
seeing its lowest level since December 2010 at $88.11. U.S. November
crude <CLc1> fell to $85.32 a barrel.
The risk aversion has boosted buying in safe-haven government debt.
Lipper data shows U.S.-based taxable bond funds attracted $12.7
billion in inflows for the week ended Wednesday, a one-week record,
while U.S. equity funds saw $6.7 billion in outflows, with most
coming from exchange-traded funds.
The yield on the U.S. 10-year Treasury note <US10YT=RR> fell to
2.2910 percent on Friday, the lowest level since June, and was up
10/32 in price.
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Later this month, the Federal Reserve is set to end its asset
purchase program that has been credited with boosting stock and bond
markets over the past two years. Many observers doubt the recent
stimulus measures unveiled by the European Central Bank will make up
for the Fed program that some believe has masked underlying issues
with demand.
"To some level, people forget how markets trade back and forth -
it's not an ever-rising move with shallow pullbacks," said Michael
O’Rourke, chief market strategist at JonesTrading in Greenwich,
Connecticut.
A string of dismal data from Germany and other large euro zone
economies in recent weeks has fed anxiety over a possible return to
recession in the region, and the jury is still out on the ECB's
proposed policy response.
Some investors have been speculating that the ECB will be forced to
launch a sovereign bond-buying program, styled on the Fed's
quantitative easing.
China's shares ended down on Friday as investors remained cautious
ahead of September economic data due next week. Economists expect
the Chinese economy to have grown at its weakest pace in more than
five years, according to a Reuters poll.
The U.S. dollar index <.DXY>, which tracks the greenback against six
major currencies, was up 0.44 percent at 85.902. Against the euro
<EUR=>, the dollar was up 0.61 percent at $1.2613. The dollar fell
0.1 percent against the yen to 107.71 yen <JPY=>.
Euro zone bond yields bounced off record lows after top Federal
Reserve officials hinted at an interest rate rise in the middle of
next year, reversing some bets for a longer period of near-zero
rates.
(Editing by Meredith Mazzilli and Leslie Adler)
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