The broad market selloff that began last week resumed in earnest late Wednesday as investors fled equities for gold, which hit a new high above $1,800, and Treasurys, where the day's auction of 10-year notes carried a yield of 2.14%, the lowest on record.
The Dow closed down 519 points at 10719.94, a drop of 4.62%. The NASDAQ dropped 4.09%, or 101.47, to close at 2381.05. The S&P 500 lost 4.42% to close at 1120.76. Volume was exceedingly heavy, and the selloff accelerated late in the session, raising concerns for the market open Thursday. The VIX "fear index" traded on the Chicago Board of Options was up 18% on the day.
The selloff more than erased Tuesday's gains, which came after the Federal Reserve said it would keep interest rates near 0% for at least two more years.
Analysts pointed to fears that France could suffer a ratings downgrade similar to that which was handed to the U.S. on Friday by Standard & Poor's. Fears also persisted about the debts of Greece, Italy, Portugal, Ireland and Spain.
Bank stocks suffered major losses and ended the day at or near 52-week lows.
The entire home-building sector was hit hard again. The S&P home-builder SPDR XHB closed down 5.17% to $13.40, just 25 cents above its 52-week low.Among the group, M/I Homes (NYSE:SHO) took the biggest losses, dropping 13.2% to $7.21. Beazer Homes USA (NYSE:BZH) lost another 11.5% to close at $1.62, a new 52-week low and roughly where the stock was during the height of the financial crisis. KB Home (NYSE:KBH) shed 11.3% to $6.22, also a 52-week low. Standard Pacific (NYSE:SPF) was the fourth double-digit loser, down 10.74% to close at $2.16, a new 52-week low not seen since early 2009.
Most of the rest of the group was right behind: Ryland Group (NYSE:RYL) down 9.32% at $10.61; Lennar Corp. (NYSE:LEN) down 9.3% to $13.32; PulteGroup(NYSE:PHM) down 9.2% to $4.24; Meritage Homes Corp. (NYSE:MTH) down 8.4% to %16.38; Avatar Holdings (NASDAQ:AVTR) down 8.8% at $11.85; M.D.C. Holdings(NYSE:MDC) down 7.3% to $16.09; Hovnanian Enterprises (NYSE:HOV) down 6.8% to $1.23; Toll Brothers (NYSE:TOL) down 6.5% to $15.64. D.R. Horton(NYSE:DHI) and NVR (NYSE:NVR) held up the best, with Horton down 3.8% to$9.18 and NVR off 3.2% to $577.28.
Weyerhaeuser, which is structured as a REIT but includes Winchester Homes and the lumber company, was down 5.3% to $16.20.