A searing six-year rally in U.S. stocks had advanced into the summer months, shrugging off challenges such as the dispute over Greece’s debt. Most of the decline is probably behind us from a point standpoint. U.S. oil in storage has reached levels not seen in at least 80 years. But he warned that the market sell-off could spiral. “The phenomenal six-year bull market may finally meet its match in China-induced global deflation”.
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Q: What’s a inventory market correction?
Even before Friday’s rout, global stocks were jittery.
The Dow Jones Industrial Average officially entered correction territory this afternoon after dropping 530.81 points, or 3.1%, to 16,459.88 at today. At the sixth anniversary of the bull market in March, the Standard and Poor’s 500 index had more than tripled in value. A correction isn’t the identical as a bear market, which is outlined as when a inventory index or particular person inventory falls 20 % from its most-recent peak.
In Canada, the TSX fell 263.33 points to 13,473.67. Crude oil prices fell below $40 a barrel for the first time since 2009. Later Friday, oil was trading at $40.45, almost 25 percent below its price at the start of the year.
It added to anxiety that has built up in recent weeks over China’s slowing growth and the depreciation of the yuan as well as plunging commodity prices.
But O’Hare also pointed to overly high valuations for US shares recently given modest growth prospects in the US economy.
After the government devalued its currency last week, Wall Street has become extra anxious about the China slowdown.
Investors will get another clue on the economy on Thursday when the government releases its estimate of economic growth in the April-June period.
Naturally, no one knows what next week will be like in the stock market or the global economy, but investors might end up being a bit more cautious in the near future.
“There is a relatively more ominous slowdown going on in emerging markets – and that’s what the trade is all about right now”, said Gina Martin Adams, an equity strategist at Wells Fargo Securities.
The turmoil in stocks, which saw equities around the around nose down, led some forecasters to predict that the Federal Reserve will hold off on raising interest rates.
Many investors still anticipate that the Fed will begin raising interest rates by the end of the year, but fewer of them expect an increase next month after reading minutes from the Fed’s meeting last month on Wednesday. Eight of the 10 S&P sectors are now in negative territory for the year. Numbers below 50 show a contraction. And last week’s surprise devaluation of China’s yuan byBeijing sent shockwaves through other emerging countries that might face tougher competition from lower-priced Chinese exports.
The flash index is the earliest available indicator of manufacturing sector operating conditions in China.
These measures have not been enough, as China’s overnight money market rates have continued to inch upward.
The main Shanghai index fell 4.3 percent, while the Shenzhen index closed 5.4 percent lower. The London blue-chip index fell for the ninth consecutive day – its longest losing streak also since 2011 – by 2.8 per cent, or 180.24 points, to 6,187.65.
European shares followed suit.
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While it can be hard at times to determine the exact cause of market movements, that’s not the case for Friday’s declines.
