Signs of complacency were evident before stock markets around the world tumbled on Friday.
European shares have been on a tear this year, even with Greece seemingly edging closer to default. Doubts about China’s economy did not stop its stocks from more than doubling in the last 12 months. The United States market has been lukewarm this year, but the excitement seemed back on Thursday, after three companies carried out initial stock public offerings that rose sharply on their first day of trading.
But the good times evaporated on Friday. The day’s moves weren’t large by recent standards, but the global nature of the swoon gave traders and analysts pause. The benchmark Standard & Poor’s 500-stock index fell 23.81, or 1.1 percent, to close at 2,081.18.
The Dow Jones industrial average dropped 279.47 points, or 1.5 percent, to close at 17,826.30. At one point in the day, it was down as much as 357 points. The Dow is more or less flat for the year and down about 2.5 percent from the high, not adjusted for inflation, that it reached last month. The Nasdaq composite index fell 75.98, or 1.5 percent, to 4,931.81.
Chinese stock futures, which allow traders to bet on future movements in shares, plunged on Friday. The sell-off occurred after Chinese market regulators on Friday announced changes that could restrict the supply of loans that investors use to finance stock trades and increase the amount of negative bets against Chinese stocks.
A technical issue also agitated traders. There was a failure of about two and a half hours on Bloomberg terminals, the computers that banks and investment firms around the world rely on for many financial activities.
Germany’s DAX index declined 2.58 percent. Adding a chill to the market on Friday, the yield on the 10-year German government bond fell to 0.08 percent.
Investors flock to German government bonds during periods of nervousness, making people willing to accept such low returns. The yield on the United States 10-year Treasury note, another safe haven investment, fell to 1.87 percent from 1.90 late Thursday.
Some analysts said the markets had looked vulnerable to a sell-off.
As shares have risen, the valuations on companies have become more expensive, which can make investors less likely to hold them if earnings disappoint. Volatility in the markets has also dropped in recent weeks, suggesting that investors thought that the outlook for stocks and bonds was predictable.
“If there is a news item, the market reacts because of this vulnerability,” Jim Paulsen, chief investment strategist at Wells Capital Management, said.
Plenty of challenges remain for investors.
One hurdle, Mr. Paulsen said, is an increase in interest rates by the Federal Reserve. The Fed is expected to raise rates this year, which could prompt investors to take a more cautious view of the markets. Inflation numbers released on Friday contained signs that prices have continued to rise this year, which may prompt the Fed to increase rates sooner.
Greece’s clashes over its debts with other European leaders are not likely to disappear. If Greece were to default and drop out of the euro, global markets might be in for a period of strong turbulence. But even if the country strikes a deal, it may be weeks before an agreement is forged.
The United States market may be able to absorb bad news out of Europe if American companies report strong earnings. Large banks, JPMorgan Chase and Goldman Sachs included, reported impressive first-quarter results this week.
General Electric, which announced last week that it was going to scale back its lending businesses sharply, reported results on Friday that showed that its industrial operations were performing solidly. Shares of G.E. fell 3 cents, or 0.1 percent, to $ 27.25, despite the market sell-off.
But shares of American Express fell 4.4 percent on Friday after the company reported earnings on Thursday after the markets closed.
The distress over the red ink on Friday was in stark contrast to the applause that greeted the dazzling debuts of three companies on the United States stock market on Thursday.
Those companies, Etsy, an online marketplace for artisanal products; Virtu Financial, a high-frequency trading firm; and Party City, a party supplies company, all traded substantially higher on Thursday. On Friday, the stocks of Virtu and Party City rose. But Etsy shares fell 8.1 percent.
stock market – Bing News