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US stocks slumped in a broad decline on Thursday, with the S&P 500 falling below a key technical level and erasing its gains for the month as concerns mounted over the strength of overseas economies and ongoing tensions with Russia. Across the Atlantic, European shares fell sharply, with the Euro zone's blue-chip index slipping to a three-month low, on concerns of an earlier than expected interest rate hike in the United States and a debt default by Argentina.
The S&P 500, falling in its biggest one-day decline since April 10, moved solidly under its 50-day moving average, a level it has not closed below since April 15, though it has dipped under it since then. The moving average is viewed as a sign of short-term momentum, and selling accelerated after the level was breached.
All 10 primary S&P 500 sectors were down on the day, with energy the biggest decliner with a drop of 1.8 per cent. Almost 90 per cent of stocks traded on the New York Stock Exchange fell, while 82 per cent of Nasdaq-listed shares traded lower. The CBOE Volatility index rose 20 per cent to 15.98, its highest level since April, though well under its historical average of 20.
"We've been extended from the 50-day moving average and are correcting those excesses," said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland, Ohio. "The levels we were at were pretty optimistic given how little clarity we had about global economic growth going forward."
The Dow Jones industrial average fell 205.13 points or 1.22 per cent, to 16,675.23. The S&P 500 lost 29.52 points, or 1.5 per cent, to 1,940.55 and the Nasdaq Composite dropped 82.63 points, or 1.85 per cent, to 4,380.27.
In Europe, Spanish stocks came under severe pressure, with Madrid's IBEX dropping 2.1 per cent, as traders cited worries over Spanish companies' exposure to Latin America after Argentina defaulted on its debt on Thursday.
Steep falls in some stocks following their earnings reports also hurt sentiment. The broader market sell-off accelerated in the afternoon after the US market opened lower and extended losses later in the session, with the Euro STOXX 50 falling 1.7 per cent to its lowest since mid-April. Europe's main volatility index rose 9.4 per cent to a three-month high.
Investors were jittery after solid growth numbers from the US, the world's biggest economy, on Wednesday and expectations that Friday's US non-farm payrolls numbers will surprise on the upside raised concerns that the Federal Reserve might start raising key interest rates earlier.
Disappointing earnings reports also put pressure on some stocks, with German sportswear firm Adidas slumping 15.4 per cent, the top faller on the FTSEurofirst 300, which ended 1.3 per cent weaker at 1,349.34 points, its lowest close in three months and a weaker close for a second month.
Portugal's Banco Espirito Santo sank nearly 50 per cent at one point to a record low after booking a ^3.6 billion first-half loss, and disappointing earnings at Spanish healthcare firm Grifols sent its shares down 14 per cent.
BES, which closed 42 per cent lower, pushed Portugal's PSI 20 index 3.1 per cent lower to underperform the wider market, while Adidas dragged Germany's DAX 1.9 per cent down after saying it will scale back plans to expand in Russia and overhaul its golf business.
