Dow Jones industrials drop more than 1,000 points as stock market losses deepen

Marley Jay, The Associated Press</span>
Published Monday, February 5, 2018 3:10PM EST
Last Updated Monday, February 5, 2018 3:14PM EST

NEW YORK -- The Dow Jones industrial average dropped more than 1,000 points Monday, bringing it back just below 25,000 points, a level it first crossed a month ago. The heavy losses deepened a slump that began on Friday as investors worried that creeping signs of higher inflation and interest rates could derail the market's record-setting rally.

Banks are taking some of the biggest losses. Wells Fargo is plunging after the Federal Reserve hit the bank with new sanctions over a scandal that involved opening millions of phoney consumer accounts. Bond yields slipped after moving sharply higher Friday.

KEEPING SCORE: The Standard & Poor's 500 index lost 2 points, or 1.9 per cent, to 2,709 as of 2:36 p.m. Eastern time. The Dow Jones industrial average gave up 552 points, or 2.2 per cent, to 24,972. The Nasdaq composite fell 101 points, or 1.4 per cent, to 7,140. The Russell 2000 index of smaller-company stocks was down 25 points, or 1 per cent, to 1,522.

The S&P 500 is now down 5 per cent from its latest record high, set January 26. Investors are worried about evidence of rising inflation in the U.S. Increased inflation might push the Federal Reserve to raise interest rates more quickly, which could slow down economic growth by making it make it more expensive for people and businesses to borrow money. And bond yields haven't been this high in years. That's making bonds more appealing to investors compared with stocks.

WELLS FARGO PLUNGES: Wells Fargo dropped $5.32, or 8.3 per cent, to $58.75. Late Friday the Fed said it will freeze Wells Fargo's assets at the level where they stood at the end of last year until it can demonstrate improved internal controls. The San Francisco bank also agreed to remove four directors from its board.

WAKING UP: The stock market has been unusually calm for more than a year. The combination of economic growth in the U.S. and other major economies, low interest rates, and support from central banks meant stocks could keep rising steadily without a lot of bumps along the way. Experts have been warning that that wouldn't last forever.

The decline over the last few days isn't large by historic standards, but stocks haven't suffered a 5 per cent drop since the two days after Britain voted to leave the European Union in June 2016. They recovered those losses within days. The market hasn't gone through a 10 per cent drop since early 2016, when oil prices were plunging as investors worried about a drop in global growth, which could have sharply reduced demand. U.S. crude hit a low of about $26 a barrel in February of that year.

SWEETENED OFFER: Chipmaker Broadcom raised its offer for competitor Qualcomm to $121 billion in cash and stock, or $82 per share, and called the bid its best and final offer. It had offered $103 billion for Qualcomm, and that company says it will review the bid. Broadcom rose $2.04 to $237.52.

However Qualcomm dipped $2.61, or 4 per cent, to $63.46 after analysts said Apple may end a deal with Qualcomm and have Intel make chips for futures iPhone models instead. Intel gained 53 cents, or 1.1 per cent, to $46.68.

ENERGY: Benchmark U.S. crude oil fell $1.30, or 2 per cent, to $64.15 a barrel in New York. Brent crude, the standard for international oil prices, lost 97 cents, or 1.4 per cent, to $67.61 a barrel in London.

Wholesale gasoline lost 3 cents to $1.85 a gallon. Heating oil shed 3 cents to $2.02 a gallon. Natural gas sank 10 cents to $2.75 per 1,000 cubic feet.

Exxon Mobil lost $3.79, or 4.5 per cent, to $80.74 and Chevron gave up $3.20, or 2.7 per cent, to $115.38. Both companies reported disappointing fourth-quarter results on Friday and are coming off their biggest losses in years.

MARKET LEADERS LOSING: Almost three-fourths of the stocks on the New York Stock Exchange traded lower. Some of the largest losses went to companies that have done exceptionally well over the last year. Alphabet, Google's parent company, lost $29.99, or 2.7 per cent, to $1,089.21. Chipmaker Nvidia fell $8.69, or 3.7 per cent, to $224.83. 3M skidded $6.23, or 2.5 per cent, to $238.94.

BONDS: Bond prices receded after moving sharply higher on Friday. The yield on the 10-year Treasury slipped to 2.82 per cent from 2.84 per cent.

CURRENCIES: The dollar fell to 109.88 yen from 110.28 yen. The euro slipped to $1.2415 from $1.2451.

METALS: Gold declined 80 cents to $1,336.50 an ounce. Silver dipped 4cents to $16.67 an ounce. Copper rose 3 cents to $3.22 a pound.

BITCOIN WOES: Bitcoin prices and futures continued to sink. According to Coindesk, the price of bitcoin fell 15 per cent to $6,957. It reached a high of almost $20,000 in December, and traded under $1,000 in early 2017. Many financial pros warn that bitcoin is in a speculative bubble that could burst anytime. On the CME, bitcoin futures plunged 19 per cent to $6,975. They tumbled 18 per cent to $6,950 on the Cboe.

GERMAN COALITION TALKS: Stocks in Europe also fell. Leading political parties in Germany, which is the largest economy in Europe, have struggled to form a government. Chancellor Angela Merkel's conservative Union bloc and the centre-left Social Democrats are still in talks about extending their alliance of the past four years.

Britain's FTSE 100 lost 1.5 per cent while France's CAC 40 slid 1.5 per cent. The DAX in Germany shed 0.8 per cent.

ASIA: Japan's benchmark Nikkei 225 tumbled 2.6 per cent and the South Korean Kospi shed 1.3 per cent. Hong Kong's Hang Seng index sank 1.1 per cent.

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