Brexit chaos and sinking bank stocks are combining to deal the stock market another blow.<\/b>
\nUS stocks hit session lows after Prime Minister Theresa May said she would delay a crucial vote on her Brexit deal. The British pound extended its losses, plunging 1.6% against the US dollar. Sterling is on track for its worst close since April 2017.
„We seem to have taken a turn for the worse because of the Brexit news,“ said Mark Luschini, chief investment strategist at Janney Capital. „Any news that isn’t good is immediately treated as terrible.“
Monday’s losses knocked the Dow and S&P 500 deeper into the red for the year. And the selling left the Nasdaq unchanged on 2018, wiping out huge gains recorded earlier this year.
The Brexit chaos reinforces one of Wall Street’s biggest fears: slowing global growth. Germany and Japan are already in economic contraction, while China’s economy has suffered from a wave of tariffs. A messy divorce between the UK and European Union is the last thing the global economy needs.
FTSE 100 was down 0.4%. The FTSE 250, which has more companies focused on doing business in the UK, dropped 1.6%.
„The big worry is economic growth,“ said David Joy, chief market strategist at Ameriprise Financial. „Nobody knows what to make of the trade situation.“
The CNN Business Fear & Greed Index, a gauge of market sentiment, is flashing „extreme fear.“ The VIX ( VIX) volatility index climbed another 9%, leaving it up 40% in December.
The market is „starting to price in a recession-like scenario,“ JPMorgan Chase chief economist Bruce Kasman wrote in a report published on Friday.
JPMorgan estimates that the odds of a recession, based on a combination of economic data and market variables, has climbed to 36% from 25% at the end of September.
„We do not see as high a risk of recession as financial markets imply,“ Kasman said.
Concerns about growth and fluctuations in the bond market have slammed bank stocks. The S&P 500 banking sector led the way lower on Monday, building on last week’s steep losses. Bank of America ( BAC), Citigroup ( C) and Wells Fargo ( WFC) lost about 2% apiece.
Investors are worried about how an economic slowdown would impact demand for loans. Banks are also hurt by the flattening bond yield, a central fear in recent days. The narrowing gap between long and short term bond yields makes it harder for banks to make money on the difference between what they pay out in interest rates and lend at. A yield curve inversion has been a reliable indicator of recessions in the past.
„The message that financials are sending about growth is more ominous,“ said Joy. „Banks are a proxy for the outlook for growth. And the outlook is diminishing.“
Apple ( AAPL) was also under pressure after Qualcomm ( QCOM) was granted an injunction against the iPhone maker in China. The ruling bans the sale and import of most iPhone models in China. Apple fell sharply but then rebounded.
Daniel Ives, analyst at Wedbush, called the China ruling another „gut punch“ given how important that market is to Apple.
„It’s been a string of bad news around iPhone demand, transparency in the food chain, supplier cuts, China tariff worries,“ Ives wrote to clients on Monday.
CNN Business‘ Charles Riley contributed to this report.<\/p>\n