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.
\u00ab\u00a0We seem to have taken a turn for the worse because of the Brexit news,\u00a0\u00bb said Mark Luschini, chief investment strategist at Janney Capital. \u00ab\u00a0Any news that isn’t good is immediately treated as terrible.\u00a0\u00bb
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%.
\u00ab\u00a0The big worry is economic growth,\u00a0\u00bb said David Joy, chief market strategist at Ameriprise Financial. \u00ab\u00a0Nobody knows what to make of the trade situation.\u00a0\u00bb
The CNN Business Fear & Greed Index, a gauge of market sentiment, is flashing \u00ab\u00a0extreme fear.\u00a0\u00bb The VIX ( VIX) volatility index climbed another 9%, leaving it up 40% in December.
The market is \u00ab\u00a0starting to price in a recession-like scenario,\u00a0\u00bb 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.
\u00ab\u00a0We do not see as high a risk of recession as financial markets imply,\u00a0\u00bb 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.
\u00ab\u00a0The message that financials are sending about growth is more ominous,\u00a0\u00bb said Joy. \u00ab\u00a0Banks are a proxy for the outlook for growth. And the outlook is diminishing.\u00a0\u00bb
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 \u00ab\u00a0gut punch\u00a0\u00bb given how important that market is to Apple.
\u00ab\u00a0It’s been a string of bad news around iPhone demand, transparency in the food chain, supplier cuts, China tariff worries,\u00a0\u00bb Ives wrote to clients on Monday.
CNN Business’ Charles Riley contributed to this report.<\/p>\n