Another day of big losses Monday knocked U.S. stocks to their lowest levels in more than a year.
Selling was widespread. Investors dumped high-growth technology and retail companies as well as steadier high-dividend companies. Hospitals and health insurers slumped after a federal judge in Texas ruled that the 2010 Affordable Care Act is unconstitutional.
The Dow Jones industrial average fell 507 points, following a 496-point drop Friday. All the major U.S. stock indexes fell at least 2%. Oil closed below $50 a barrel for the first time since October 2017. Bonds rose and their yields fell.
Mark Hackett, chief of investment research at Nationwide Investment Management, attributed Monday's action in stocks to investor concerns about the slowing global economy. But he felt it was overdone. “That is basically retail investors panicking,” he said. “Investors basically are confusing the idea of a slowdown with a recession.”
Investors sold almost everything. Fewer than 40 of the 500 stocks comprising the Standard & Poor’s 500 index finished the day higher. Amazon led a rout among retailers, and tech companies such as Microsoft fell sharply. Some of the largest losses went to utilities and real estate companies, which have done better than the rest of the market during the turbulence of the last three months.
The S&P 500, the benchmark for many investors and funds, finished at its lowest level since Oct. 9, 2017. It has fallen 13.1% since its Sept. 20 record-high close. The Russell 2000, an index of smaller companies, has dropped more than 20% since the end of August, meaning that index is now in what Wall Street calls a bear market.
Germany's main stock index also fell into a bear market Monday as companies such as Siemens and SAP kept falling.
Smaller U.S. stocks have swooned as investors have lost confidence in the U.S. economy's growth prospects. Smaller companies are considered more vulnerable in a downturn than larger companies because they depend more on economic growth and tend to have higher levels of debt.
Hackett said the current drop is similar to the market's big plunge in late 2015 and early 2016, which was also tied to fears that the global economy was weakening in a hurry. But even though the economy is slowing down after its surge in 2017 and 2018, it should continue to do fairly well, he said.
“It's a slowdown from extremely high levels to healthy levels,” he said. “The globe isn't going into a recession.”
The S&P 500 skidded 54.01 points, or 2.1%, to 2,545.94 on Monday. The Dow Jones industrial average fell 507.53 points, or 2.1%, to 23,592.98. The Nasdaq composite declined 156.93 points, or 2.3%, to 6,753.73. The Russell 2000 index retreated 32.97 points, or 2.3%, to 1,378.14.
Following the healthcare ruling, hospital operator HCA slid 2.8% to $123.1 and health insurer UnitedHealth fell 2.6% to $258.07. Centene, a health insurer that focuses on Medicaid and the Affordable Care Act's individual health insurance exchanges, sank 4.8% to $121.42. Molina dropped 8.9% to $120.
Many experts expect the ruling to be overturned, but with the markets suffering steep declines in recent months, investors didn't appear willing to wait and see.
Benchmark U.S. crude fell 2.6% to $49.88 a barrel in New York. Brent crude, used to price international oils, fell 1.1% to $59.61 a barrel in London. Weaker economic growth would mean less demand for oil, and traders have been concerned there is too much crude supply on the market. That has chopped oil prices by one-third since early October.
Bond prices rose. The yield on the 10-year Treasury note fell to 2.86% from 2.89%.
The Federal Reserve is expected to raise interest rates again Wednesday, the fourth increase of this year. It has been raising rates over the last three years, and investors will want to know if the Fed is scaling back its plans for further increases based on the turmoil in the stock market over the last few months and mounting evidence that world economic growth is slowing down.
Hackett said investors will be happy if the Fed adjusts its plans and projects fewer increases in interest rates next year. But he said investors might be startled if the Fed decides to not raise rates this week.
British Prime Minister Theresa May said Parliament will vote Jan. 14 on her deal setting terms for Britain's departure from the European Union. She canceled a vote on the deal last week because legislators clearly were going to reject it. May insists she can save the deal, but pressure is mounting for either a vote by lawmakers or a new referendum on the issue.
Britain is scheduled to leave the EU in late March, and if it does so without a deal governing its trade and economic relationships with the bloc, it could bring huge disruptions to the British and European economies and financial markets.
Wholesale gasoline slid 1.7% to $1.41 a gallon. Heating oil fell 1% to $1.83 a gallon. Natural gas dived 7.8% to $3.53 per 1,000 cubic feet.
Gold rose 0.8% to $1,251.80 an ounce. Silver rose 0.8% to $14.76 an ounce. Copper fell 0.3% to $2.75 a pound.
The dollar fell to 112.75 yen from 113.29 yen. The euro rose to $1.1350 from $1.1303. The British pound rose to $1.2629 from $1.2579.
Germany's DAX lost 0.9%. That put the index, which represents Europe's largest single economy, into a bear market. France's CAC 40 and Britain's FTSE 100 each fell 1.1%.