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Here’s Why The Dow Just Had Its Second-Worst Day of the Year

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Trader on the floor of the New York Mercantile Exchange in New YorkPhotograph by Spencer Platt — Getty Images

The Dow Jones industrial average fell 394 points on Friday. It was the worst day of the year, outside of Brexit, when the index got clocked for just over 600 points.

It was a really bad day for investors.

Every stock in the Dow, all 30, were down. Just 11 stocks out of the S&P 500 were up on Friday, meaning 98% of that index’s members ended down for the day. In all, the S&P 500 slipped 53 points or nearly 2.5%.

The reason for the massive drop appeared to be the Fed. Earlier in the day, Federal Reserve bank president Eric Rosengren said that he thought it might be appropriate for the U.S. central bank to start raising rates. Rosengren’s comments were notable because he has previously been a big proponent of keeping rates low.

Higher interest rates are generally viewed as bad for the stock market because they tend to slow the economy, and lower what investors are willing to pay for investments.The Fed’s December 2015 rate increase kicked off a stock market sell-off that resulted in one of the worst Januarys in the stock market’s history.

A Fed rate hike would be particularly bad now because it is likely to catch investors off guard. Last month’s disappointing jobs report seem to suggest to most investors that the Fed would hold off on raising rates at its policy meeting on September 20-21. Although a very few astute market commentators said at the time that the jobs numbers were actually more positive than they appeared, and that an increase in interest rates this month was still a strong possibility.

But while Rosengren’s comments weighed on the market Friday, it was arguably a catalyst for an overdue selloff at a time when corporate profits have slowed and stock prices remain high. Also Donald Trump has been gaining in the polls recently, adding uncertainty around the election, something markets tend not to like. (Related: Here’s One Big Thing Trump Is 100% Correct About)

On Friday, the best performing stocks of the day were bank stocks on the assumption that higher interest rates would produce higher profits. But even bank stocks didn’t do all that well. Shares of J.P. Morgan Chase (JPM) dropped slightly more than 1%. Insurer Metlife’s (MET) stock was up a a little more than 1%. Higher interest rates should be better for the insurance companies’ investment portfolios. Healthcare stocks also bucked the trend, as they are generally seen as a safe haven.

Verizon Communications (VZ) fell the most of any Dow component Friday. Shares of the telecommunications giant dropped nearly $2, or just over 3%, to just under $52. It was a change of fortune for Verizon, which had bucked the selloff earlier in the year, and had been one of the market’s best performers early on in 2016. But concerns that it may be overspending to purchase Yahoo, a deal that was announced in July have dragged down the stock. Shares of Apple (AAPL) were also down, by more than 2%, over continued concerns that it’s new iPhone 7 won’t be a big seller.