The Dow and broader U.S. stock market plunged anew on Thursday after the European Central Bank (ECB) launched fresh stimulus measures to combat a slowing regional economy. The shocking announcement brought recession fears back to the fore as investors continue to navigate a synchronized slowdown in global growth.
Dow Plunges; S&P 500, Nasdaq Follow
All of Wall Street’s major indexes declined sharply through the mid-morning, reflecting a volatile pre-market session for U.S. stock futures. The Dow Jones Industrial Average was bracing for its fourth consecutive drop. As of 12:59 pm ET, the Dow was down 136.4 points or 0.53% to 25,537.06. The index was down more than 300 points earlier.
Twenty-four of 30 Dow members recorded declines, with three declining by more than 0.55%.
The broad S&P 500 Index fell 0.44% to 2,759.27. Nine of 11 primary sectors recorded losses, with financials falling 0.92% to lead the decline. Shares of materials fell 0.85% on average. Discretionary shares were off by 0.82%. Utilities and real estate were the lone bright spots, gaining 0.45% and 0.73%.
The technology-focused Nasdaq Composite Index declined 0.49% to 7,469.10.
A measure of implied volatility known as the CBOE VIX is on track to settle at five-week highs. The so-called “fear index” peaked at 17.81 on a scale of 1-100 where 20 represents the historic average. VIX is currently valued at 15.94, having gained 1.27%.
ECB Reignites Debate Over Global Economic Health
Less than three months after phasing out its massive bond-buying program, the European Central Bank on Thursday announced a new batch of stimulus measures designed to combat a slowing Eurozone economy. The central bank said it would hold interest rates at their current levels through the end of 2019, months longer than previously expected. Beginning in September, the ECB will offer banks cheap long-term loans with a maturity of two years.
The new measures follow a sharp slowdown in euro area growth over the past two quarters that has investors concerned about a full-blown recession. Eurozone gross domestic product (GDP) expanded just 0.2% in the first quarter, up slightly from 0.1% in Q4. The economy expanded 0.4% in the two quarters before that, a marked slowdown from 2017 levels.
Earlier in the day, the Organization for Economic Cooperation and Development (OECD) slashed its forecast for global growth even more drastically than the International Monetary Fund. The Paris-based organization now expects the world economy to grow just 3.3% this year compared with 3.5% previously.
“The global expansion continues to lose momentum,’’ the OECD said as it downgraded almost every country in the Group of 20. “Growth outcomes could be weaker still if downside risks materialize or interact.”
Italy, Germany and the euro area as a whole saw the most dramatic cuts.