Dow Falls Sharply in Worst Day in Three Months

Stocks sold off sharply as investors grappled with disappointing data on retail sales, business inventories, and industrial production.

The Dow Jones Industrial Average fell 764 points, or 2.25 percent, its worst one-day performance in three months. The Nasdaq Composite dropped 3.2 percent. The S&P 500 was down around 2.5 percent.

All three major indexes had been down by more earlier in the day but rallied off the lows. The broad declines were a stark contrast to the market’s sanguinity in the face of new projections from the Federal Reserve on Wednesday that showed central bank officials predict the economy will barely grow at all next year while inflation will remain persistent and interest rates will climb above five percent.

This morning the Commerce Department reported retail sales figures that were much worse than expected. Similarly, the report on business inventories missed expectations. Both the Federal Reserve Bank of Philadelpha and the New York Fed released reports on regional manufacturing data that came in below expectations. The Federal Reserve reported industrial production numbers that also missed expectations, particularly for the factory sector.

The Labor Department’s report on jobless claims broke the pattern, showing claims—a proxy for layoffs—coming in better than expected at 211,000. This may have heightened fears that the Federal Reserve will have to raise rates even further next year to cool down a sizzling labor market that has so far resisted all efforts to restore a normal balance between the supply and demand for workers. In other words, even the good news was likely interpreted as bad news.

All 11 sectors of the S&P 500 were down for the day. Technology stocks were particularly hard hit, with the communications services sector and the information technology sector the two worst performing of the day. Energy was the best performing sector.

Verizon was the only Dow stock to gain for the day, rising 0.8 percent. Intel shares fell by 3.9 percent, Apple shares fell by 4.7 percent, and IBM took the title as the worst-performing Dow component, falling five percent. Disney shares were down 3.6 percent.