Signs of distress in financial markets accumulated amid deepening concern over the health of the global economy, with U.S. stocks sliding to a 22-month low as the cost of protecting against default by junk-rated companies soared to the highest level since 2012.
Mining and banking stocks drove the Standard & Poor’s 500 Index to its lowest close since April 2014, even as energy producers erased losses. Investors sought out the safest assets, sending yields on 10-year Treasuries to the lowest level in a year, and rates on Germany’s 10-year bunds to their lowest point since April. Meanwhile, yields on bonds of Europe’s most- indebted countries rose. Oil slid below $30 a barrel amid ongoing glut concerns, while gold advanced for a seventh day, its longest advance since March.
“We’re still seeing selling pressure from the tech valuation resetting last week, as well as the drop in oil,” said Matt Maley, an equity strategist at Miller Tabak & Co LLC in New York. “But it’s not just a problem with technology and some of the high-flyers that have rolled over in recent days, but also the recent stresses in the credit markets.”
U.S. stocks sank last week as concern about everything from China to oil and interest rates spurred strategists to lower their year-end projections for equities. In Europe, data today showed the Sentix investor confidence index dropped to the lowest level in more than a year in February, while concerns about Deutsche Bank AG’s ability to pay bond coupons increased. Crude failed to hold onto gains after Saudi Arabia held talks Sunday with Venezuela, which is trying to drum up support for a coordinated oil-output cut to buttress prices. Most Asian markets were closed for the Lunar New Year holidays.
The S&P 500 fell 1.4 percent as of 4 p.m. in New York. The Nasdaq 100 Index slid for a fifth day, closing at its lowest level since October 2014. The Nasdaq Composite Index has tumbled more than 19 percent from a July record, leaving it on the precipice of a bear market.
Bank shares contributed among the biggest losses Monday, with Bank of America Corp. and Citigroup Inc. tumbled more than 6 percent, while Wells Fargo & Co. and JPMorgan Chase & Co. sank by at least 3 percent. Energy stocks rose 0.1 percent.
The S&P 500 declined last week for the first time in three, with a jobs-day tumble on Friday turning into a full-blown selloff. A rout in high-valued software and Internet companies continued Monday with Facebook Inc. falling 4.2 percent after its steepest retreat in more than a year.
While the S&P 500’s valuation of 15.3 times forecast earnings is in line with the average of the past five years, the measure has plunged 12 percent since the start of the year. The gauge remains more expensive than developed markets in Europe, where the Stoxx Europe 600 Index trades for 13.8 times estimated earnings.
The Stoxx 600 slid for a sixth day, declining 3.5 percent to the lowest since 2014. Equity benchmarks in Germany, France and Spain dropped at least 3.2 percent. Greece’s ASE Index sank 7.9 percent to the lowest since 1990 as banks tumbled.
Deutsche Bank tumbled 9.5 percent and credit-default swaps on its debt soared. Analysts at CreditSights Inc. said the bank may struggle to pay coupons on its riskiest bonds next year should operating results disappoint or the cost of litigation be higher than expected. Deutsche said it has sufficient capacity this year and next.