CHK Chesapeake Energy Corporation

By Dan Strumpf and Riva Gold 

Stocks pared their declines heading into the close Monday in a volatile session that saw investors rush into haven assets.

After dropping as much as 401 points earlier, the Dow Jones Industrial Average traded down 131 points, or 0.8%, to 16074 in afternoon trading, while the S&P 500 lost 1% and the technology-laden Nasdaq Composite declined 1.4%.

Losses were heaviest in the financial sector, where big banks in both the U.S. and Europe sank amid persistent worries about the pace of global economic growth. Shares of Deutsche Bank fell 9.5% in Germany, while the country's DAX index fell 3.3% to close in bear-market territory, down 21% from a late-November high.

Goldman Sachs Group shares declined 4.8%, while Morgan Stanley fell 6.4%.

Heavy selling in beleaguered energy shares also intensified. Chesapeake Energy Corp. fell by as much as half and was recently down 34%. The natural-gas producer said it "has no plans to pursue bankruptcy" after reports intensified such fears. Pipeline company Williams Cos. lost 35%.

As investors sought safety, they rushed into government bonds, boosting prices and pressuring yields. U.S. 10-year Treasury yields fell to 1.736% from 1.846% on Friday as prices rose. Gold--another haven--rose 3.4% to $1197.50 an ounce.

U.S. stocks have fallen sharply this year on the back of tumbling oil prices and worries over decelerating global economic growth. Investors have bid up government bonds as a haven, pushing yields around the world sharply lower.

"The big picture thing is there's a lot more pain to go around," said Bill Costello, an energy analyst at investment manager Westwood Holdings Group Inc., referring to the sharp declines in energy producer shares. "The longer oil prices stay down, the harder the slog these companies will go through."

Losses in the oil market accelerated, with U.S.-traded crude futures down 3.9% to $29.69 a barrel.

Other forces were also weighing down stocks world-wide, some traders said. Data over the weekend on China's foreign-exchange reserves raised concerns about the country's ability to continue its intervention in the currency markets.

The data showed that China's currency reserves fell to their lowest level in more than three years, though many analysts had expected an even larger drop.

Investors also continued to digest recent U.S. economic data. Following Friday's U.S. jobs report, "there's a lot of uncertainty weighing on markets," said Philippe Gijsels, chief strategist at BNP Paribas Fortis. "People are starting to worry that the lower oil price and situation in China are starting to impact the U.S. and European economies," he added.

Junk bond prices fell. A proxy for junk, the $13.7 billion iShares iBoxx USD High Yield Corporate Bond exchange-traded fund, lost 1.4%.

In Europe, the Stoxx Europe 600 fell 3.5%, reversing an early bounce. After five consecutive sessions of losses, the pan-European index now sits at lows not seen since 2014.

While falling oil prices benefit consumers, a rise or stabilization in oil prices "would alleviate strains from the global financial system," said Mark Heppenstall, chief investment officer at Penn Mutual Asset Management, which manages $20 billion in assets.

"A lot of emerging market economies have revenues dependent on oil and commodities and debt denominated in U.S. dollars--that mix has proven pretty toxic," he added.

Monday's moves followed a rocky session on Wall Street Friday, when a dive in technology shares and the mixed jobs report sent U.S.-listed stocks lower across the board.

Job creation slowed in January after three consecutive months of gains, data showed, but a slight fall in unemployment and a modest uptick in wages left the prospect of further U.S. interest rate increases this year on the table.

In Asian trade, Japan's Nikkei Stock Average gained 1.1% as the yen fell against the dollar, while Australia's S&P ASX 200 ended flat.

Other markets in Asia were closed for the Lunar New Year Holiday.

In currencies, the dollar fell 0.9% against the yen, while the euro lost 0.2% against the dollar.

In commodities, three-month copper futures on the London Metal Exchange were down 0.5% at $4592.50 a ton.

--Corrie Driebusch contributed to this article.

Write to Riva Gold at riva.gold@wsj.com

(END) Dow Jones Newswires

February 08, 2016 16:07 ET (21:07 GMT)

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