NEW YORK — For investors, there was no place to go.
A day after the Federal Reserve roiled Wall Street when it said it could reduce its aggressive economic stimulus program this year, financial markets around the world plunged Thursday. A slowdown in Chinese manufacturing and reports of a squeeze in the world’s second-biggest economy heightened worries.
The global sell-off began in Asia and spread to Europe and then the U.S., where the Dow Jones industrial average fell 353 points, wiping out six weeks of gains.
But the damage wasn’t just in stocks. Bond prices fell, and the yield on the benchmark 10-year note rose to 2.42 percent, its highest level since August 2011, although still low by historical standards. Oil and gold also slid.
“People are worried about higher interest rates,” said Robert Pavlik, chief market strategist at Banyan Partners. “Higher rates have the ability to cut across all sectors of the economy.”
The question now is whether the markets’ moves on Thursday were an overreaction or a sign of volatility to come. What is becoming clearer is that traders and investors are looking for a new equilibrium after a period of ultra-low rates, because of the Fed’s bond-buying, which spawned one of the great bull markets of all time.
“You want a nice, gradual rise” in rates, said Talley Leger, a strategist at Macro Vision Research.
A brighter outlook for the U.S. economy normally would convince people to buy stocks, not sell them. But Leger said investors, hooked on Fed stimulus, sold.
“Markets are asking for expansion of already stimulative policies, and they’re not getting it,” he said. “It’s like a drug supplier and an addict.”
Thursday’s wipeout doesn’t mean the stock run-up is over. The S&P 500 is still up 11.4 percent for the year and 135 percent since a recession low in March 2009. But it could suggest the start of a phase in which the stock market is tied more closely to the fundamentals of the economy.
The Dow’s drop Thursday — which knocked the average down 2.3 percent to 14,758.32 — was its biggest since November 2011. It comes just three weeks after the index reached an all-time high of 15,409. The index has lost 560 points in the past two days, wiping out its gains from May and June.