NEW YORK -- Signs of a subdued economic recovery sent investors out of stocks Thursday and in search of safer assets like the dollar.
Major indexes tumbled about 1 percent, including the Dow Jones industrial average, which lost 94 points but ended well off its low. Energy and material stocks logged some of the biggest losses as a jump in the dollar sent commodity prices tumbling. Meanwhile, an analyst's downgrade of the chip industry pulled technology shares sharply lower.
As stocks fell, investors flocked to the dollar and Treasury bills. The yield on the three-month T-bill, considered one of the safest investments, tumbled to its lowest level since December. The Chicago Board Options Exchange's Volatility Index, also known as Wall Street's fear gauge, rose more than 4 percent. Overseas markets also fell sharply.
The day's trade was a shift out of riskier assets and back into safe havens like the dollar and Treasury bills. After amassing significant gains during an eight-month rally in stocks, investors are hesitant to take on too many extra risks as the year ends, worried that the economy's rebound might not be sustainable.
"Large money managers, going into the end of the year, are looking to protect their gains and are shifting assets," said Adam Gould, senior portfolio manager at Direxion Funds in New York.
For much of this year, investors have been selling dollars and putting their money in riskier assets like stocks and commodities that have the potential to earn higher returns.
High unemployment
Now, investors wonder whether the dollar's slide has run its course, and whether other markets are overheated considering the economy's many challenges, including high unemployment.
Reports on the economy gave investors little incentive to hold on to stocks. Labor Department figures indicated that employers are still shedding jobs, and the Mortgage Bankers Association reported a surge in foreclosures.
Still, analysts warn that the dollar's rise Thursday doesn't necessarily mark the beginning of a long-term move. Record-low U.S. interest rates could continue to weigh on the dollar.
Jon Biele, head of capital markets at Cowen & Co., said investors seek direction. "There are a lot of questions out there and not a lot of answers," he said. "When you don't have the right information, you don't do anything."
The Dow fell 93.87, or 0.9 percent, to 10,332.44, after being down as much as 170. It was the Dow's biggest point drop since Oct. 30.
The broader Standard & Poor's 500 index fell 14.90, or 1.3 percent, to 1,094.90, while the Nasdaq composite index fell 36.32, or 1.7 percent, to 2,156.82.
Overseas, Britain's FTSE 100 fell 1.4 percent; Germany's DAX index lost 1.5 percent, and France's CAC-40 slid 1.8 percent. Earlier Thursday, Japan's Nikkei stock average fell 1.3 percent.
