JPM JP Morgan Chase and Co

By Ellie Ismailidou and Sara Sjolin, MarketWatch

Financials crumble; investors flock to gold, Treasurys

U.S. stocks were mired in the red Thursday, sinking amid a global rout in risk assets led by tumbling oil prices and stress in the banking sector.

Testimony from Federal Reserve Chairwoman Janet Yellen--continuing a second day of hearings to explain the state of the U.S. economy in front of Capitol Hill--wasn't helping.

The S&P 500 was down 35 points, or 1.9%, lower at 1,816, on track for its lowest closing levels in 22 months. The Dow Jones Industrial Average was down 360 points, or 2.3%, at 15,554, weighed by a nearly 10% drop in Boeing Company (BA). Meanwhile, the Nasdaq Composite was down 54 points, or 1.3%, at 4,229.

Also read:Stock market live blog: Global equity rout intensifies; yields plunge, yen soars (http://blogs.marketwatch.com/thetell/2016/02/11/stock-market-live-blog-global-equity-rout-intensifies-yields-plunge-yen-soars/#wysiwygEditor)

The global stock rout started overnight and deepened in U.S. morning trade as Federal Reserve Chairwoman Janet Yellen testified before the Senate Banking Committee (http://blogs.marketwatch.com/capitolreport/2016/02/11/live-video-and-updates-of-janet-yellens-appearance-in-senate-committee/).

The Fed chief defended the central bank's December rate increase, claiming it was designed to diminish accommodation "by a modest amount", repeating many of her views expressed in her testimony to the House Financial Services on Wednesday (http://www.marketwatch.com/story/yellen-says-financial-conditions-less-supportive-to-growth-2016-02-10).

On Thursday, Yellen added that she didn't want to take negative interest rates "off the table" as a policy tool. Yellen said the Fed is "taking a look at them again" to be prepared if the Fed needs to assist the economy.

Read:Bond market, Yellen face off on negative interest rates (http://www.marketwatch.com/story/bond-market-yellen-face-off-on-negative-interest-rates-2016-02-10)

As risk assets got slammed, demand for so-called haven assets like gold and government bonds surged. The 10-year Treasury yield , the Treasury market's benchmark, plunged to a 3 1/2 -year-low (http://www.marketwatch.com/story/treasury-yields-plunge-to-lowest-level-since-august-2012-2016-02-11), while gold , also considered a safe asset, soared to a one-year high (http://www.marketwatch.com/story/gold-jumps-to-1-year-high-as-global-market-rout-spurs-safe-haven-buying-2016-02-11).

Technical analysts were focusing on the next support levels for the S&P 500, as the index was heading to its lowest closing level since April 2014 but was still above its Jan. 20 intraday low of 1,812.29.

The index briefly tumbled to a session low of 1,813, trading less than a point above that significant support level, which has been described (http://www.marketwatch.com/story/dow-futures-drop-200-points-setting-wall-street-up-for-an-ugly-start-2016-02-08) as a "significant short-term technical formation" after which there is "a downside pattern" that makes the chances of reversal much slimmer.

"The market has been very resilient on multiple tests of the intraday low from Jan. 20 of 1,812.29 on the S&P 500. Today will be the most serious test of that intraday support level," said Tim Anderson, managing director at MND Partners, on Thursday.

Strategists called Thursday's selloff a repeat of the same risk-off theme fueled by fears of economic slowdown that has been rattling global markets since the beginning of the year.

"It's a global cocktail that continues to be crafted on a daily basis [including] worries about negative interest rates coupled with pain in the banking sector and falling crude oil signaling deflation," said Michael Antonelli, equity sales trader at R.W Baird & Co.

On Thursday, Sweden's central bank cut its main interest rate even further below zero (http://www.marketwatch.com/story/sweden-cuts-main-interest-rate-further-below-zero-2016-02-11-54851335) as it sought to hold down the national currency to support a recovery in the inflation rate toward a 2% target.

Financials were leading the S&P 500 losses, down 3.1%, as ultralow interest rates and widening credit spreads have recently fueled widespread worries about banks' balance sheets, sparking a selloff in the banking sector. The SPDR Financial Select Sector exchange-traded fund (XLF) has tumbled 15% year to date, according to Morningstar. Banking giants Goldman Sachs Group, Inc. (GS) and J.P. Morgan Chase & Co. (JPM) were among the leading laggards on the Dow industrials, down 4% and 3.8% respectively.

Banks were also leading the carnage in Europe , with Société Générale tumbling 15% following a disappointing fourth-quarter earnings report.

Thursday's moves follow a late-session selloff (http://www.marketwatch.com/story/dow-futures-up-100-points-as-markets-wait-for-yellen-to-speak-2016-02-10) on Wednesday, when the Dow average logged its longest losing streak since late August and the S&P 500 index matched its longest run of losses since November.

Fed expectations: The market-implied probability of more rate hikes in 2016 continued to tumble on Thursday.

The December Fed-funds futures contract has fully taken out the odds of a rate increase by year-end and the contract table all through 2016 is now beginning to price in a rate cut, according to data from the Lindsey Group.

On the U.S. data docket, the number of people who applied for unemployment benefits in early February fell to the lowest level (http://www.marketwatch.com/story/low-jobless-claims-show-no-sign-of-rising-layoffs-2016-02-11)in almost two months, a reassuring sign that few workers are losing their jobs despite a slowdown in hiring.

Greenback falls: The dollar plunged Thursday to the lowest level against the yen (http://www.marketwatch.com/story/dollar-slumps-to-lowest-level-against-yen-since-late-2014-2016-02-11) since 2014, but later recovered somewhat as rumors circulated that the Bank of Japan may have intervened to weaken its currency.

Read:The one stock sector you need to fight the bear-market flu (http://www.marketwatch.com/story/the-one-stock-sector-you-need-to-fight-the-spreading-bear-market-virus-2016-02-11)

Oil blues: Falling oil prices were seen as fueling Thursday's global market rout. West Texas Intermediate crude oil slid below $27 a barrel, flirting with its lowest level in nearly 13 years (http://www.marketwatch.com/story/crude-shrugs-off-supply-decline-pushes-below-27-a-barrel-2016-02-11).

This weighed on shares of oil-related companies. Exxon Mobil Corp. (XOM) fell 1.6%, Transocean Ltd. (RIG) lost 3.6%, and ConocoPhillips (COP) shaved off 2%.

The Velocity Shares 3X Long Crude ETN (UWTI) sank 6.1%.

Other movers: Shares of Twitter Inc. (TWTR) lost 2.9% after the social-media company late Wednesday reported flat user growth for the fourth-quarter (http://www.marketwatch.com/story/twitter-proves-wall-street-critics-were-right-2016-02-10).

On a more upbeat note, Cisco Systems Inc. (CSCO) jumped 8.8% after its second-quarter earnings and revenue, released late Wednesday, beat forecasts (http://www.marketwatch.com/story/cisco-beats-estimates-and-raises-dividend-2016-02-10).

Tesla Motors Inc. (TSLA) gained 8% after the luxury electric car maker said it could achieve a net profit (http://www.marketwatch.com/story/tesla-reports-loss-but-says-profit-in-sight-2016-02-10) in the final quarter of 2016.

PepsiCo Inc. (PEP) slipped 1% as the company issued a soft outlook (http://www.marketwatch.com/story/pepsico-profit-up-31-but-outlook-is-soft-2016-02-11).

After the market closes, American International Group Inc. (AIG), Pandora Media Inc. (P) and CBS Corp. (CBSA) are scheduled to release earnings.

Other markets: Hong Kong's Hang Seng Index returned to trading after the Lunar New Year with a 3.9% tumble. That helped drive a selloff at the open in Europe, where banks were hard hit. The Stoxx Europe 600 index fell to its lowest close since October 2013 (http://www.marketwatch.com/story/european-stocks-knocked-to-lowest-since-2013-as-fear-selling-returns-2016-02-11).

(END) Dow Jones Newswires

February 11, 2016 12:45 ET (17:45 GMT)

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