North American stock indexes extended last week’s slump, as the Dow Jones industrial average plunged nearly 1,600 points during Monday’s trading session — bringing an end to a period of record-setting calm in the market.
In New York, the Dow finished the day down 1,175.21 points to 24,345.75, or 4.6%, erasing its gains for the year. The S&P 500 index fell 113.19 points to 2,648.94 and the Nasdaq composite index dropped 273.42 points to 6,967.53.
The Dow’s point loss would be its biggest of all time, though in percentage terms, its 5.6% decline wasn’t as big as its worst drop during the financial crisis.
The market’s sharp drop began on Friday as investors worried that creeping signs of higher inflation might push the U.S. Federal Reserve to raise interest rates more quickly, which could slow down economic growth by making it more expensive for people and businesses to borrow money.
“I look at the broader factors that are driving this sell-off, and it’s really the pick-up in interest rates that seems to be at the heart of the anxiety in the marketplace,” said Craig Fehr, a Canadian markets strategist at Edward Jones in St. Louis.
“And I look at a driver like that — and to the extent that interest rates are rising because economic optimism is picking up and that’s stoking some concerns about rising inflation — that for me is a healthy backbone for the fundamentals.”
“That means, in my opinion, this sell-off while certainly aggressive is probably likely to prove more temporary then to be a harbinger of an imminent bear market,” Fehr said.
“Any pullback that’s driven by increasing optimism, that’s a buying opportunity.”
North of the border, Canada’s largest stock market also experience a sharp drop Monday.
On the Toronto Stock Exchange, the S&P/TSX composite index was down 271.22 points to 15,334.81 in a broad-based decline that saw all sectors finish in the red.
Stocks in Europe also fell Monday, as Britain’s FTSE 100 lost 1.5% while France’s CAC 40 slid 1.5%. The DAX in Germany shed 0.8%.
Japan’s benchmark Nikkei 225 tumbled 2.6% and the South Korean Kospi shed 1.3%. Hong Kong’s Hang Seng index sank 1.1%.
In currency markets, the Canadian dollar closed at an average trading value of US80.11¢, down 0.67 of a U.S. cent.
On the commodities front, the March crude contract fell US$1.30 to US$64.15 per barrel and the March natural gas contract was down US10¢ to US$2.75 per mmBTU.
The April gold contract gave back US80¢ to US$1,336.50 an ounce and the March copper contract was up US3¢ to US$3.22 a pound.
With files from The Associated Press