Stocks decline sharply as Bank of England cuts its growth forecast.
U.S. stocks declined sharply on Thursday after the Bank of England (BOE) slashed its growth outlook for the next two years, casting doubts about the health of the global economy.
All of Wall Street’s major indices closed in the red. The Dow Jones Industrial Average (NYSEARCA:DIA) plunged 220.77 points, or 0.9%, to 25,169.53.
The broad S&P 500 Index (NYSEARCA:SPY) fell 0.9% to close at 2,706.05. Nine of 11 sectors finished in negative territory, with energy stocks shouldering the heaviest losses. A total of seven sectors recorded losses of 1% or more.
Meanwhile, the technology focused Nasdaq Composite Index (NYSEARCA:QQQ) declined 1.2% to 7,288.35.
A measure of implied volatility known as the CBOE VIX (NYSEARCA:VXX) surged double-digits on Thursday, reaching a high of 17.89. The so-called “fear index” would eventually settle at 16.57, having gained 7.7%. That was the highest settlement in a week.
The Bank of England on Thursday slashed its growth estimates for this year and next, citing uncertainty over Brexit negotiations. The BOE now expects the economy to grow just 1.2% this year, down from a prior estimate of 1.7%. In 2020, the growth outlook was revised down to 1.5% from 1.7% previously.
In economic data, U.S. initial jobless claims fell by 19,000 to a seasonally adjusted 234,000 for the week ended Jan. 26, the Department of Labor said. Analysts had called for a decline to 221,000.
The Final Word: Wall Street’s bullish revival is at risk of fading, as global economic uncertainty continues to weigh on sentiment. It remains to be seen whether the gains that accompanied earnings season can be maintained once reporting season draws to a close later this month.