NEW YORK -- Any complacency on Wall Street disappeared Monday after deadly explosions at the Boston Marathon, gold's biggest one-day swoon in 30 years and more signs of an economic slowdown in China. The sense of calm in financial markets was shattered, sending a closely watched "fear" gauge soaring more than 43% to its highest level since Feb. 25. The volatile day reminded investors of market risks.
Bears had been warning that investors were too optimistic, making them more vulnerable to a shock, if one were to occur. Well, the market got hit with not one but three shocks in a single trading day. And investors sitting on huge profits from the stock market's record-setting run to fresh all-time highs hit the sell button to lock in those profits.
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Since markets closed for business last Thursday, investors have been confronted with a trio of new threats that is likely to turn what had been a risk-on psychology to a more cautious, risk-off mentality. The re-emergence of the possibility of terror on U.S. soil is back in play. Gold's more than 9% plunge Monday was a reminder that markets can be unforgiving after long periods of prosperity. Add in the fact that China's economy slowed more than expected to 7.7% in the first quarter also raised fears that the global growth story may not be as sunny as bulls believed.
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Total it up, and fear is back. "It was a confluence of events," says Scott Black, president of investment firm Delphi Management. "There was too much euphoria built in."