U.S. stock markets plunged as the trading day began, with many wondering how long the massive selloff would last.
Advertisement
Wall Street officially entered a technical “correction” on Friday – defined as a fall of at least 10 percent from its most recent peak.
The S&P 500 lost 77.68 points, or 3.94 percent, to 1,893.21, putting it formally in correction mode.
The Dow Jones Industrial Average dropped more than 1,000 points shortly after the markets opened, but it recovered slightly to be down 620 points, or 6%, shortly before 10am.
“China could be forced to devalue the yuan even more, should its economy falter, and the equity markets are dealing with the prospect of a weaker yuan amplifying the negative impact from a sluggish Chinese economy“, said Eiji Kinouchi, chief technical analyst at Daiwa Securities in Tokyo.
European markets also took a hit on Monday, with the major indexes down roughly 5 percent. This follows a rough day of trading on Friday, during which the the Dow lost 531 points. The Dow is down 384 points Monday to 16,067, which is 12.3 percent below its record close of 18,312 set on May 19.
Oil prices, commodities and the currencies of many developing countries also tumbled on concerns that a sharp slowdown in China might hurt economic growth around the globe.
Circuit breakers were first introduced after the 1987 stock-market crash.
McCaig noted that August is usually a quiet month for markets as investors enjoy the last few weeks of summer, Fox Business News reports. The Nasdaq Composite Index, which contains mostly tech stocks, is also down about 10% from its high in July.
As the Shanghai Composite Index sank by almost 9% – its biggest one-day drop in eight years – Xinhua, Beijing’s official news agency, admitted China was facing a “Black Monday”.
The main catalyst for the sell-off and retreat from risky assets has been a pullback in Chinese stocks, which has raised worries about the health of the world’s second-biggest economy.
The worldwide market decline has extended to commodities, including crude oil, which is below $40 per barrel for the first time since the financial crisis six years ago.
Advertisement
On currency markets, the pound was little changed against the US dollar and down slightly against the euro. That uncertainty crept into the market, and says Rehman, the U.S.’s talk of raising interest rates didn’t help.
