Stocks plunge across the board; Dow Jones knocked from record highs.
U.S. stocks pulled back sharply on Thursday, as rising bond yields and trade tensions with China triggered a flight from riskier assets.
All of Wall Street’s major gauges finished firmly in the red. The Dow Jones Industrial Average (NYSEARCA:DIA) plunged 200.94 points, or 0.8%, to close at 26,627.45.
The broader S&P 500 Index (NYSEARCA:SPY) fell 0.8% to 2,901.60. Nine of 11 primary sectors finished in the red, with communication services and information technology leading the market lower.
Meanwhile, the technology-heavy Nasdaq Composite Index (NYSEARCA:QQQ) was the biggest decliner percentage-wise, falling 1.8% to 7,879.51.
A measure of implied volatility known as the CBOE VIX (NYSEARCA:VXX) spiked on Thursday, reaching its highest level in three months. The so-called “fear index” gained a whopping 25% to 14.52 on a scale of 1-100 where 20 represents the historic mean.
JPMorgan Chase & Co has become far less optimistic that the United States and China will be able to resolve their trade dispute. In a note to clients that appeared Wednesday, the Wall Street mega bank said “A full-blown trade war becomes our new base case scenario for 2019.”
The bank added: “There is no clear sign of mitigating confrontation between China and the US in the near term.”
The Final Word: A trade war with China could disrupt the flow of capital into U.S. equity markets, leading to a sharp pullback in share prices. U.S. stocks are considered dangerously overvalued by some observers who fear the Trump reflation trade has gotten out of hand.