The price of USA crude oil dipped to 12-year lows as investors anxious worldwide demand will fall even further.
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Earlier in the day the Dow was down more than 300 points. Macy’s lost 99 cents, or 2.7 percent, to $35.90 while Nordstrom gave up $1.95, or 4 percent, to $46.55 and Kohl’s fell $2.33, or 4.6 percent, to $48.53.
Earlier Thursday, trading on China’s Shanghai and Shenzen stock markets were pre-emptively halted for a second time this week after new “circuit breakers” were triggered when a benchmark stock index fell seven per cent.
Major indexes in the USA shed over 2 percent each overnight. Worry, yes, but not panic.
All eyes are on China and its turbulent stock market.
“This is not a situation that should result in panic; it should result in caution”, said Kristina Hooper, head of investment strategies for the U.S.at Allianz Global Investors.
Worries about China have been fueled by a decline in the value of the yuan and disappointing economic data. In New York, the Dow Jones average of 30 stocks plummeted 392.41 points to 16,514.10, the broader S&P 500 index lost 47.17 points to 1,943.09, while the Nasdaq declined 146.33 points to 4,689.43.
Meanwhile, the Shenzhen Component was down more than 8 percent when it closed.
Fewer people sought US unemployment benefits last week, suggesting that the job market remains insulated from the turmoil overseas in Europe and China. “It would be hard for them to deliver four hikes this year”, said Charles St-Arnaud, currency strategist with Nomura Securities in NY.
Apple, the world’s largest publicly traded company, had its biggest loss in four months.
But the energy sector fared better following a lift in the oil price.
A cheaper yuan would, in turn, make Chinese exports cheaper, and give the economy a lift.
The government will “allow for more depreciation, use reserves and tighter controls on cross-border capital flows”, said Wang Tao, chief China economist at UBS Group in Hong Kong. The spot rate is allowed to trade with a range 2% above or below the official fixing on any given day.
Investors have been retreating from Chinese assets as the economy is forecast to slow to the weakest pace of growth in 25 years. Less than one month after the United States raised interest rates, investors are questioning the strength of global growth and corporate profit expansion.
NPR’s Jim Zarroli reports that China’s plunge “also sent the price of commodities down around the world”.
“The U.S. economy and the global economy isn’t crumbling”, said Pyle.
“As we come to the end of the week European equity markets look on course to post some of the worst weekly losses since the previous China induced volatility, seen last August”.
On Thursday evening, regulators announced they were suspending the circuit breakers that kick in when the market falls more than 5 percent. London’s FTSE 100 is down just over 2 percent and the German Dax index is off over 2.5 percent.
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MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.2 per cent, extending this week’s loss to 7.4 per cent, which would be its biggest fall since September 2011.
