US equity benchmarks plunged on Thursday as nagging concerns about the world's largest economy and the health of European banks sparked mass exodus from risky assets. Gold touched a new record high and Treasury bond yields tumbled to new all-time low.
After falling as much as 528.61 points, the Dow Jones Industrial Average closed at 10,990.58, down 419.63 points, or 3.7%, with all but one of its 30 components shedding value.
The Standard & Poor’s 500 Index declined 53.24 points, or 4.5%, to 1,140.65. Energy and material stocks were hit the hardest among its 10 industry groups. The index is now 16% below its bull-market high hit in late April.
The Nasdaq Composite Index dropped 131.05 points, or 5.2%, to 2,380.43.
New York Stock Exchange composite volume was 6.31 billion, rebounding from the prior session’s low levels, but short of August’s average of 6.39 billion.
Morgan Stanley announced a dismal forecast for global economic growth. A key reading on US housing came in worse than expected and a report showed a significant slowdown in the domestic manufacturing sector.
Morgan Stanley slashed its global growth outlook for 2011 and 2012, adding that the US and Europe are hovering dangerously close to a recession.
Investors rushed to move their money into safe US government bonds - and the yield on the benchmark 10-year Treasury briefly fell below 2%. The price on the 10-year Treasury jumped, pushing the yield to a record low of 1.99% from 2.16% Wednesday.
Gold futures for December delivery rose $28.20 to settle at $1,822 an ounce, a new closing high (not adjusted for inflation) for the precious metal.
The VIX - Wall Street's so-called fear gauge - jumped 35% to a reading of 42.7. Anything above 30 is considered panic.
The dollar gained strength against the euro, Japanese yen and the British pound.
Oil for September delivery fell $5.20, or 6%, to $82.38 a barrel.
The Philadelphia Federal Reserve's regional manufacturing index dropped to a reading of minus 30.7 in July, which indicates severe contraction in economic activity during the prior month. The number was far worse than expected. Economists had forecast a reading of plus 0.5.
It was the worst figure for the Philly Fed since March 2009 - when the US economy was still in recession.
In other economic data, the Labor Department reported that weekly jobless claims rose by a worse-than-expected 9,000 claims to 408,000 in the week ended Aug. 13.
The National Association of Realtors said that existing home sales fell by 3.5% in July, far worse than the 2% rise that the market was looking for.
The government also reported that inflation rose more than expected last month. The consumer price index increased 0.5% in the month - led by a 4.7% jump in gas prices from month to month. Economists expected a 0.2% rise in July.
The Conference Board reported its index of leading economic indicators grew 0.5% in July, better than the 0.4% rise expected by analysts.
Shares of Dow component Hewlett-Packard (HP) dropped 8% after the company cut its full-year outlook and said that it was looking to spin off its PC business. The company also said that it would purchase British software company Autonomy for $10.2 billion in cash.
The technology giant also released its quarterly earnings statement earlier than expected. HP posted an adjusted profit of $1.10 a share versus the $1.09 that analysts had expected.
Shares of McGraw Hill dropped 6% after a New York Times report said that the Justice Department was investigating rating agency Standard & Poor's, a subsidiary, for allegedly overrating mortgage-backed securities. The mortgage securities meltdown led to the 2008 financial crisis.
The stock price for Sears Holdings fell more than 8% after the retailer reported a disappointing quarterly loss of $1.13 per share.