Updated Jan. 15, 2016 7:24 p.m. ET
Investor anxiety deepened Friday as a familiar medley of fresh lows in oil prices, stumbling Chinese stocks and weak U.S. economic data sent the Dow Jones Industrial Average to its biggest one-day percentage drop since early September.
The Dow industrials lost almost 400 points in Friday’s selloff, and investors snatched up bonds anew, sending 10-year Treasury yields briefly below 2% for the first time since October. Among the economic reports Friday, U.S. retail sales showed their weakest year for growth since the end of the recession in 2009, while a regional manufacturing survey disappointed.
Further complicating Friday’s action, investors were concerned about holding stocks heading into a three-day holiday weekend in the U.S.
The domestic stock market will be closed Monday. Others around the world, including Chinese markets, are open and could fall even further.
Financial adviser Michael Fein said he received the most phone calls from nervous clients ever on Friday morning. One client even dropped into Mr. Fein’s office to gauge whether she should be panicking.
“Being down 500 points on the Dow is depressing and scary, but I remind them [you should not be] making your investment decision based on an overreaction of China fears,” said Mr. Fein, 44 years old, president at CIC Wealth in Gaithersburg, Md.. “You become a psychologist in this environment.”
The Dow Jones Industrial Average fell 390.97 points, or 2.4%, to end at 15988.08 Friday.
The decline put the Dow in correction territory, falling more than 10% from its recent high in November. Friday was the first time since Aug. 25 that the index ended below 16000. The blue-chip index fell as much as 537 points in early afternoon trading.
The S&P 500 declined 2.2%, and the Nasdaq Composite fell 2.7%.
The Dow industrials and the S&P 500 are down about 8% this year, while the Nasdaq is down more than 10%.
Worries about slowing global growth have plagued stocks for months, but many analysts have maintained that the U.S. economy is relatively healthy and that recent declines in the stock market should stabilize.
U.S. economic data released Friday, however, raised doubts about the economy’s strength. U.S. retail sales fell last month, showing consumers are dialing back spending. A gauge of manufacturing in New York state fell sharply.
Worries about the health of the global economy have led all types of investors, from hedge funds to individuals, to sell stocks this year, traders and analysts say.
Public pension plans and mutual funds are safeguarding their portfolios by holding more cash than they have in years.
“While we expected to have more volatility in 2016, I certainly did not expect the year to start with this big of a downdraft,” said Kate Warne, investment strategist at retail brokerage Edward Jones.
“It’s very frustrating and painful day to day,” Ms. Warne said. “When stocks start dropping, investor fears increase, which leads to more drops in the short term.”
The frustration has led to more trading—and more swings in stocks.
Through Friday’s market close, an average of nine billion shares changed hands each day in 2016, up from 6.8 billion in 2015.
Reflecting the extent of investor worries, financial stocks posted steep losses despite several upbeat earnings reports in recent days from the nation’s biggest banks. Shares of Citigroup Inc.,
the fourth-largest bank by assets, fell 6.4% Friday even though it reported its biggest annual profit in nearly a decade.
Concerns about China, the world’s second-largest economy, its weakening currency and turmoil in Chinese stock markets have kept investors away from risky assets in what has been a highly volatile start to the year.
Further steep declines in China’s stock market contributed to Friday’s global selloff.
The Shanghai Composite Index tumbled into bear-market territory, having lost 20% from a high in late December, following a state-run media report that some Chinese banks were no longer accepting stocks as collateral for loans. At the same time, official data showed weak demand for bank loans.
A renewed drop in oil prices also hit stocks around the world.
U.S. crude oil fell 5.7% to $29.42 a barrel on Friday. That was the lowest price in 12 years. Oil prices have lost about 20% this year amid concerns that the onset of Iranian exports after sanctions are lifted could add to the glut of supply. Fears about Chinese demand have also increased the pressure on oil and base-metals prices.
Investors sought safe-haven assets, including government bonds, pushing the yield on the 10-year Treasury note down to 2.035% after it briefly dipped below 2%, compared with 2.100% on Thursday. Yields fall as prices rise.
Gold surged 1.6% to $1,091.50 a troy ounce.
Some investors say the past two weeks of stock-market declines are overblown.
“When you have these macro selloffs, you tend to overshoot,” said Richard Nackenson, a portfolio manager at Neuberger Berman.
Mr. Nackenson said he believes U.S. economic growth will continue at a slow to moderate pace and that there are opportunities in stocks.
Other investors said they are still not ready to step back into the stock market despite widespread lower prices as a result of the selloff.
“There’s nothing that makes an equity investor feel very secure at this point in time,” said Wayne Lin, portfolio manager at QS Investors.
In the Markets
- Live Analysis: Markets Falling Hard, Again
- Heard: Why This Isn’t a Repeat of 2008
- Bank Stocks Plummet, Baffling Some
- China Shares Fall Into Bear Market
- 10-Year Treasury Yield Dips Below 2%
- Oil Prices Close Below $30 a Barrel
- How to Feel Safe in Today’s Market
- Stocks Are Cheaper, but Not Cheap
- Dollar Falls Against Safe-Haven Yen
- China’s Market Rout Hits Hong Kong Dollar
- Video: What Lies Behind China Slump
European Pressphoto Agency
—Saumya Vaishampayan contributed to this article.
Write to Corrie Driebusch at [email protected]
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