US stocks resumed their downward trajectory after last week’s selloff, while European and Asian equities also slumped.
With stock markets declining again, the White House said the fundamentals of the US economy are strong.
“Markets fluctuate, but the fundamentals of this economy are very strong and they are headed in the right direction,” said White House spokesman Raj Shah told reporters on Air Force One as President Donald Trump flew to Ohio.
The S&P 500 Index and Dow Jones Industrial Average hit session lows in late trading, with the Dow falling more than 400 points and all sectors of the broader gauge declining. The Stoxx Europe 600 Index retreated for a sixth day, its longest losing streak since November, following similar moves across Asia as both regions took their cue from the US rout on Friday.
Yields on core government bonds in Europe fell, as did those of 10-year Treasuries. The pound slumped, and the euro declined. The downward stock market move was sparked by US wage data last week that pointed to quickening inflation, which would lead to higher rates and, in turn, rising borrowing costs for companies.
Equity investors are looking for confirmation that recent declines represent the healthy correction many had expected after the stellar start to the year.
“The good news is bad news,” said Donald Selkin, New York-based chief market strategist at Newbridge Securities, which manages €1.6bn in assets. “Last month the market went up by 6% — that’s unsustainable.”
Elsewhere, oil extended declines after US explorers raised the number of rigs drilling for crude to the most since August. Oil prices neared their lowest in a month as rising US output and a weaker physical market added to the pressure from a widespread decline across equities and commodities Copper climbed the most in a week. Bitcoin slid below $7,000.
The S&P energy index led the decliners among the 11 major S&P sectors, with a 2% fall. Exxon’s 4.1% fall weighed the most on the Dow and was the second-biggest drag on the S&P. Wells Fargo tumbled by over 8% after the US Federal Reserve imposed new regulatory restrictions over compliance issues.
The fall weighed on other bank stocks with Bank of America, Goldman Sachs, and Citigroup down about 1%. Wall Street has been under pressure from rising bond yields, which led to the S&P 500 and the Dow seeing their worst weeks since early January 2016 while the Nasdaq recorded its worst week since early February 2016, last week.
“I think what’s happening right now can be compared to early 2016 where we saw a pullback that was confidence related rather than fundamental and we saw it reverse fairly quickly,” said Brad McMillan, chief investment officer for Commonwealth Financial.
“Seeing the 10-year break multi-year highs and the fact that it happened quickly made the market realise there are some real risks out there.” Currently, traders are pricing in three rate hikes for 2018, but if the economy and corporate earnings continue to improve, the chances of a fourth increase become more likely.
Among other stocks, Qualcomm fell 4.3% after KGI Securities said Apple might drop the chipmaker in favour of Intel as the supplier for modem chips in its next generation of iPhones.
Shares of Intel rose over 1%.