Dow plunges 350, Nasdaq down 3%; gold surges

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U.S. stocks fell sharply on Monday as falling oil prices and global growth concerns weighed on investors.

Crude prices resumed their downward trajectory, with WTI falling 1.7 percent, or 52 cents, to $30.39 a barrel. Last week, U.S. oil fell about 6 percent.

“Like it or not, we use oil as a barometer for the global economy,” said Art Hogan, chief market strategist at Wunderlich Securities.

The Dow Jones industrial average fell more than 300 points in midmorning trading, with Goldman Sachs and Home Depot weighing the most on the index.

The S&P 500 dropped about 2 percent, as consumer discretionary and financials led all sectors lower.

The Nasdaq composite shed over 2 percent as the iShares Nasdaq Biotechnology ETF (IBB) plunged over 3 percent, while Facebook and Amazon tumbled more than 3 percent.

“Without something fresh to sort of turn the tide on this, I think the path of least resistance is to the downside,” Hogan said.

Gold futures for April delivery surged nearly 3 percent — or $34.20 — to trade at $1,191.10 an ounce, and hit their highest level since June.

“The gold trade is signaling a retreat in global inflation,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott. “In times of economic stress … gold acts as a store of value.”

He also said that, in order to stem this sharp sell-off, “you’re going to need for some tangible evidence that the global economy is not slowing down, and that’s China.”

Chinese markets are closed this week due to the Lunar New Year holiday.

With no major economic data due Monday, investors were looking ahead to Fed Chair Janet Yellen’s testimony in Congress on Wednesday and Thursday.

“We have the most cautious Fed chair I’ve seen in many, many years,” said Maris Ogg, president at Tower Bridge Advisors. “I think we’re going to get a reiteration … of what we saw in the minutes.”

However, Peter Cardillo, chief market economist at First Standard Financial, said that “if she would hint that wages are rising, but still not at levels that would constitute a rate hike, then that would turn things around.

Concerns of a Fed rate hike took center stage Friday after the Bureau of Labor Statistics said the U.S. economy added 151,000 jobs in January — below expectations — but wages rose 0.5 percent.

“The wage spike we saw in the jobs report certainly sparked some Fed concerns,” Cardillo said. “But if you look at the yield curve, you wouldn’t think that.”

U.S. Treasurys rallied Monday, with the benchmark 10-year note yield falling to 1.79 percent, while two-year yields traded at 0.68 percent.

Overseas, European equities fell, with the pan-European STOXX 600 index dropping 2.3 percent. The German DAX also dipped below the 9,000 mark for the first time since October 2014.

In corporate U.S. news, Hasbro and Diamond Offshore, among others, reported quarterly results.

“Through last Friday’s close, 314 companies in the S&P 500 have now reported 4Q 2015 results,” Nick Raich, CEO of The Earnings Scout, said in a note. “Collectively, 72% of those companies have seen their next quarter’s (i.e. 1Q 2016) EPS estimates drop 4.81% after reporting.”

“Once we get through earnings season, it will be easier for investors to take a more long-term view, but my fear is that the Q1 numbers aren’t going to look much better than the Q4 numbers,” Tower Bridge’s Ogg said.

On tap this week:

Monday

Earnings: Hasbro, Yelp, 21st Century Fox, Loews, Diamond Offshore, Owens-Illionois, Owens and Minor

Tuesday

Earnings: Wendy’s, Disney, First Data, Panera Bread, Western Union, Solar City, Wellcare Health, Regeneron, Viacom, Spirit Airlines, Coca-Cola, Sanofi

6 a.m.: NFIB survey

10 a.m.: Wholesale trade; JOLTs

1 p.m.: 3-year note auction

Wednesday

Earnings: Time Warner, Cisco Systems, Twitter, Whole Foods, Tesla Motors, Humana, Sealed Air, Owens Corning, Nissan, Pioneer Natural Resources, iRobot, Flowers Foods, Rayonier, Zynga

10 a.m.: Fed Chair Janet Yellen testifies before House Committee on Financial Services

1 p.m.: 10-year note auction

1:30 p.m.: San Francisco Fed John Williams on health and the economy

2 p.m.: Federal budget

Thursday

Earnings: PepsiCo, Kellogg, Nokia, Molson Coors, Time Inc, Groupon, Pandora, Zillow, Teva Pharma, Borg Warner, Advance Auto Parts, CBS, KKR, FireEye, AIG, Activision Blizzard

8:30 a.m.: Initial claims

10 a.m.: Fed Chair Janet Yellen testifies before Senate Banking Committee

1 p.m.: 30-year bond auction

Friday

Earnings: Red Robin Gourmet Burgers, Calpine, Buckeye Partners, Interpublic, Ventas, Brookfield Asset Management

8:30 a.m.: Retail sales; import prices

10 a.m.: Consumer sentiment; business inventories; New York Fed President William Dudley speaks on household debt and credit

*Planner subject to change.

Fred Imbert

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