Banks sustained some of the worst losses as bond yields fell sharply. Lower bond yields mean lower interest rates on mortgages and other kinds of loans, which mean lower profits for banks. JPMorgan Chase fell 3.2 per cent and Bank of America fell 3.6 per cent.
The dimming expectations for global growth also send the price of crude oil sharply lower. Benchmark US crude was down 3 per cent at $US52 a barrel. That helped pull energy sector stocks lower. Occidental Petroleum gave up 3.1 per cent.
Big technology stocks, longtime investor favourites, also posted hefty losses. IBM lost 2 per cent.
The S&P 500 index fell 1.1 per cent as of 10.16am, Eastern time in the US. The Dow Jones Industrial Average fell 352 points, or 1.4 per cent, to 25,509. It was down as much as 589 earlier.
The Nasdaq fell 0.6 per cent.
China on Monday allowed its currency, the yuan, to weaken against the US dollar in response to US threats to add more tariffs to Chinese goods. China stabilised the yuan on Tuesday and that helped lift US stocks a day after they endured their worst day of the year. The volatile trading has already put a dent in the major indexes yearly gains. The S&P 500 is down 4.3 per cent for August.
Central banks in New Zealand, India and Thailand cut key interest rates Wednesday and investors around the world fear that the escalating trade war between the US and China will severely damage global growth.
After the surprise interest-rate cuts, bond yields sank around the world as investors scrambled for safety. They also poured into gold, which jumped to its highest price in more than six years.
“There is almost a paranoia amongst central bankers to avoid any potential financial hiccups that might hurt the real economy and cause a slowdown,” Jefferies strategist Sean Darby wrote in a report.
A key gauge of fear in the marketplace surged 13.7 per cent. The VIX index, which measures how much traders are paying to protect themselves from swings in the S&P 500, was still below where it was at the start of the year, when recession fears were surging, but it’s close to its highest level of the year.
European and Asian indexes were mixed.
Disney fell 5.8 per cent after disappointing investors with a sharp third quarter profit plunge that fell far short of Wall Street forecasts. The entertainment company said underperformance from its Fox movie and TV studio helped weigh down the fiscal third quarter financial results. It bought Fox’s entertainment business in March for $71 billion.
Match Group shares jumped 19.5 per cent after the operator of Tinder, OKCupid and other dating sights beat Wall Street’s second quarter earnings forecasts. The company reported a surge in Tinder subscribers and raised its revenue forecast for the year.
Drugstore operator CVS Health rose 5.8 per cent after swinging to a second quarter profit and handily beating Wall Street forecasts. The company attributed part of the gains to health insurer Aetna, which it bought for $69 billion in November.