Investors wondered whether that meant the growth here is fragile, and started selling stocks. Investors ditched beaten-down oil companies, as well as Netflix, Apple and other technology darlings.
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“This market won’t have legs until we have further clarity on the Chinese currency and U.S. rates – right now we have neither”, said Michael Ingram, a market strategist at BGC Partners in London. “This is about growth”.
The Standard and Poor’s 500 Index capped a weekly loss of 5.8 per cent, its worst drop in nearly four years.
Worrying new signs that China’s economy was losing steam drove investors to the exits, particularly after the world’s second-largest economy announced its most disappointing manufacturing results since the global financial crisis. On Friday, they got more bad news: A private survey showed another drop in manufacturing on the mainland.
The Dow Jones Industrial Average dropped 1.3% or 225 points. The Dow has erased 10 per cent from its record high in May, marking an official correction. The blue-chip stock index is down almost 900 points in the last two days, shedding over 5 percent of its value.
“We don’t know if this is the beginning of the correction or a buying opportunity, but it’s way too soon to know”, says Randy Frederick, managing director of trading and derivatives at Charles Schwab. The measure was apparently aimed at stimulating China’s exports, but one analyst at a major securities firm said, “Concerns that the Chinese economy is in that bad a shape as to need a cut [in the rate] have grown”. Those worries are valid, said Jeremy Zirin, head of investment strategy at UBS Wealth Management.
“We need China to be there for demand purposes”, Mr Kilduff said.
Oil’s torrid run of weekly losses is its worst since 1986 when Opec ramped up production and sent it as low as $10 a barrel.
“For much of this year, the glass was considered half full, and now people the last 48 hours are thinking it’s looking more empty”, said George Hashbarger, who oversees $224 million as chief executive officer and portfolio manager at Knoxville, Tenn.-based Quintium Advisors LLC.
The S&P 500 and the Dow have broken through a few key technical levels recently.
Investors are anxious about everything – China’s faltering economy, falling oil prices, the big question mark over the Federal Reserve raising interest rates in September and corporate earnings that just aren’t strong enough to justify stocks as such a high level. “Short-term sentiment is pretty weak.”, said an Analyst back at Huaxi Securities Co.
But the Fed appeared to pour cold water on those expectations earlier this week, after minutes released from July’s meeting suggested members of the policy committee weren’t convinced that the global economy could weather a hike at this point. In Japan, the Nikkei fell 3% to a six-week low.
In Australia, the benchmark S&P/ASX 200 index has lost 8.5 per cent in August, the steepest monthly fall since a 12.6 per cent plunge in October 2008. It fell by 3.19% to 1,970.89.
Hong Kong fell 1.53% to finish the day at 22,409.62 points – its lowest point since May 2014. 10-year US Treasury notes, which appreciated 10/32, with yields dropped to 2.0487%. US gold futures for December delivery settled up 0.6 percent at $1,159.60 an ounce. Brent crude oil fell to its lowest price since March 2009 to $45.10 a barrel. Chevron Corp., the global oil giant, slumped 4.39% as crude dropped below $40/bbl.
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A wide range of commodities have been hammered this year as demand for raw materials has cooled and as the US dollar gains strength against currencies used by developing countries. “Investors are scared and confused, and if you are an emerging market equity investor, probably close to suicidal”.
