Wall Street extended its 2008 plunge Thursday, recording its worst three-day decline in more than five years.
The Dow Jones industrial average plummeted 306.95 points, or 2.5 percent, to 12,159.21, its lowest close since March 2007. The blue-chip index has lost 4.8 percent since Monday, its worst three-day percentage decline since October 2002. The Dow, which is down 8.3 percent for the year, hasn’t closed below 12,000 since November 2006.
The Standard & Poor’s 500 index tumbled 39.95, or 2.9 percent, to 1333.25, its lowest close since October 2006. It is down 9.2 percent for 2008. All 10 industry groups in the S&P 500 and 452 of its stocks decreased. The Nasdaq composite index dropped 47.69, or 2.0 percent, to 2346.90, giving it a 2008 deficit of 11.5 percent.
“The problems seem to be intensifying,” said John Carey at Pioneer Investment Management in Boston. “We’re in for some rough months.”
Benchmark indexes are approaching bear markets, or declines of at least 20 percent. The S&P 500 and the Dow have lost more than 14 percent from their Oct. 9 record high closes, while the Nasdaq has tumbled 18 percent from an almost seven-year high on Oct. 31.
The Russell 2000 index, a benchmark for companies with a median market valuation of $510 million, is down 20 percent since its July 13 peak, entering its first bear market since October 2002. On Thursday it slid 19.34, or 2.8 percent, to 680.57.
Stocks opened higher but quickly gave up their gains after the Philadelphia Federal Reserve said its survey of regional manufacturing activity registered a negative 20.9 this month, a six-year low, underscoring the seriousness of the economic worries that have gripped both Wall Street and Washington in recent weeks.
Credit concerns also dogged Wall Street after rating agency Moody’s Investors Service placed bond insurer Ambac Assurance Corp. on review for a possible downgrade. That possibility alarmed investors because it would place all bonds insured by Ambac on review as well. Wall Street is concerned that bond insurers would be unable to absorb a spike in claims.
Investors’ fears of a slowing economy dominated trading. The Chicago Board Options Exchange’s volatility index, known as the “fear index,” jumped nearly 17 percent.
“The Philadelphia Fed just announced dreadful numbers,” said John O’Donoghue, co-head of equities at Cowen & Co. He said if you look back at Philadelphia Fed data for similar numbers it takes you back to the 2001-02 recession. “It’s not rocket science. The economy is slowing dramatically, and it’s being reflected in economic reports.”
The Philadelphia manufacturing reading caught Wall Street by surprise, igniting fears that the economy is slowing precipitously and that policymakers might be too late in contemplating aid.
Economists had expected that the index would come in at minus 1.5, according to Dow Jones Newswires. Instead, the minus 20.9 figure was the weakest since October 2001 when the economy was reeling from the shock of the Sept. 11 terror attacks.
Bond prices rose as stocks fell and anxious investors sought the safety of government-issued securities. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.62 percent from 3.68 percent late Wednesday.
