Dow briefly down 400 on growth concerns; gold soars
New York (Feb 2) US stocks traded sharply lower on Monday as global growth concerns weighed on investors. The Dow Jones industrial average fell 400 points in afternoon trading, with Goldman Sachs and Home Depot weighing the most on the index. Goldman had fallen about 6.5 percent in afternoon trading.
The S&P 500 dropped 2.7 percent, as materials and financials led all sectors lower.
"We're in a very broad-based sell-off. Investors are selling first and asking questions later," said Adam Sarhan, CEO of Sarhan Capital.
The Nasdaq composite shed over 3 percent as the iShares Nasdaq Biotechnology ETF (IBB) plunged about 4.5 percent, while Facebook and Amazon fell. The index was also within 1 percent of falling into bear market territory on an intraday basis.
"I think it's worries that the global economy is slowing down more than expected and that's translating into lower oil prices," said Kate Warne, investment strategist at Edward Jones.
Crude prices resumed their downward trajectory, with WTI closing 3.88 percent lower, or $1.20, at $29.69 a barrel. Last week, U.S. oil fell about 6 percent.
"Like it or not, we use oil as a barometer for the global economy," said Art Hogan, chief market strategist at Wunderlich Securities.
Gold futures for April delivery surged 3.47 percent to close at $1,197.90 an ounce, and broke above $1,200 for the first time since June. The precious metal also recorded its best trading day since December 2014.
"The gold trade is signaling a retreat in global inflation," said Mark Luschini, chief investment strategist at Janney Montgomery Scott. "In times of economic stress ... gold acts as a store of value."
He also said that, in order to stem this sharp sell-off, "you're going to need for some tangible evidence that the global economy is not slowing down, and that's China."
Chinese markets are closed this week due to the Lunar New Year holiday.
"Without something fresh to sort of turn the tide on this, I think the path of least resistance is to the downside," Wunderlich Securities' Hogan said.
With no major economic data due Monday, investors were looking ahead to Fed Chair Janet Yellen's testimony in Congress on Wednesday and Thursday.
"We have the most cautious Fed chair I've seen in many, many years," said Maris Ogg, president at Tower Bridge Advisors. "I think we're going to get a reiteration ... of what we saw in the minutes."
However, Peter Cardillo, chief market economist at First Standard Financial, said that "if she would hint that wages are rising, but still not at levels that would constitute a rate hike, then that would turn things around."