(Bloomberg News) A tumble in stocks sent the global benchmark index down more than 10 percent from this year's high and two-year Treasury yields declined to a record low amid concern that the economy is weakening, while the yen slid the most since 2008 against the dollar as Japan sold its currency.
The MSCI All-Country World Index sank 2.2 percent and the Standard & Poor's 500 Index fell 1.7 percent at 10:09 a.m. in New York. Two-year note yields fell to as low as 0.304 percent. The yen depreciated as much as about 4 percent against the dollar, the biggest decline since a 6.1 percent drop on Oct. 28, 2008, before trading 2.6 percent lower. The euro lost 1.3 percent to $1.4140. Oil retreated 1.7 percent to $90.36 a barrel, sending the S&P GSCI index of 24 commodities down 1.4 percent. Gold futures rose to a record $1,684.70 an ounce.
Concern the economic recovery is faltering has driven investors out of stocks and into the relative safety of gold, Treasuries, the Swiss franc and yen and is spurring speculation the Federal Reserve will start another stimulus program. Japan's move to sell the yen, which this week neared a postwar record, follows efforts by the Swiss central bank to curb the franc's gains. The Bank of Japan also expanded its asset- purchase fund and kept rates near zero today, while the ECB resumed bond purchases and offered banks more cash to stem the spread of the debt crisis.
"The mood right is gloomy," Mike Ryan, the New York-based chief investment strategist at UBS Wealth Management Americas, said in a telephone interview. His firm oversees $774 billion. "The burden of proof is for better data that show the economy is not falling into recession. Tomorrow's payroll report is crucial. If we see another disappointment, the stock market will have significant downside from here."
Energy and raw-material producers slumped the most among 10 industries in the S&P 500, losing more than 2.3 percent. Bank of America Corp. and Alcoa Inc. slid more than 2.8 percent to lead declines in 28 of 30 stocks in the Dow Jones Industrial Average, which plunged as much as 193 points.
The yen weakened against all 16 of its most-traded peers. Japan followed Switzerland in seeking to stem appreciating exchange rates that threatened to damage export competitiveness, also pledging to inject 10 trillion yen ($126 billion) in funds to the economy. Japan acted alone in the market, while officials were in touch with other nations, Finance Minister Yoshihiko Noda told reporters today. The Bank of Japan followed up with monetary stimulus that totaled double the amount pledged days after the March 11 earthquake.
The franc erased earlier losses versus the euro, rallying 1 percent and pared its decline versus the dollar. The Swiss National Bank unexpectedly cut interest rates to zero yesterday and injected francs into money markets to curb what it called the "massively overvalued" currency.
The Japanese intervention weakened the yen to a level against the dollar not seen since July 12, whereas the franc failed to depreciate yesterday to as little as the previous day's low against the euro following the SNB action.
The Dollar Index, which tracks the U.S. currency against those of six trading partners, jumped as much as 1.4 percent, the most since June 15.
The pound was 0.6 percent weaker against the dollar after the Bank of England kept its key rate at a record low of 0.5 percent as predicted by all 55 economists surveyed by Bloomberg