Raul Rodriguez sweeps the floor of the New York Stock Exchange after a frenzied day of trading Friday.
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After the government devalued its currency last week, Wall Street has become extra anxious about the China slowdown. “They don’t seem in control of the situation and we could see feedback loops that haunt the U.S”. Investors ditched beaten-down oil companies, as well as Netflix, Apple and other technology darlings. Shares in public transportation, communication, and highways were among the biggest losers. Still, markets around the world also saw strong sell offs over the last two days.
The Russell 2000 also entered correction territory on an intraday basis, a 10 percent decline from its most recent high, and was down more than 9 percent from its closing high on June 19.
U.S. crude was down 2.1 percent at $39.61 a barrel while Brent lost 1.6 percent to $44.73 a barrel.
“Market sentiment has changed to negative at absolutely the worst time of the year because August is a month with very low volume so any move is exacerbated”, he said.
“There’s no shortage of things people can cite, from the movement in currencies, to the weakness in the commodities and fears about China“, he said. The decline in the price of oil and other commodities might indicate there is less demand for such commodities because economies are slowing.
What shocked many was how the US market capitulated, having held up until now even as China’s slowdown, Greece’s debt crisis and a plunge in emerging-market currencies roiled other markets. Countries like South Korea and Vietnam now have to contend not just with flagging sales to China but tougher competition for exports.
Many investors anticipate the US central bank to begin to raise interest rates by the end of the year although expectations for a September hike were tempered after the release of the minutes from the Federal Reserve’s July meeting on Wednesday. European and Latin American markets were all in the red too. As a result, the Fed may decide to wait until later in the year, or longer.
Many investors and economists had bet on a Fed rate hike in September, something it hasn’t done since 2006. “To the extent that global financial conditions are tightening, it is something that feeds into your forecast”.
Global markets have come under pressure this week on growing concerns about a slowing Chinese economy and slumping oil prices.
Elsewhere on Wall Street, the S&P 500 lost 13.94 points, or 0.68%, to 2,021.79 and the Nasdaq composite dropped 76.26 points, or 1.56 percent, to 4,801.23. In Britain, the FTSE 100 index was down 2.1 percent.
Back in the U.S., government bond prices rose, pushing the yield on the 10-year Treasury note down to 2.04 percent. It was up 0.555 at $1,159.60 per ounce. U.S. crude fell 87 cents to close at $40.45 in New York.
MSCI’s broadest index of Asia-Pacific shares outside Japan duly sank over 4 percent to a three-year low.
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Friday’s wave of selling culminated with the S&P 500 losing almost 6 per cent for the week in its worst weekly slump since 2011. It is one of the few independent measures of China’s manufacturing growth, compiled by Markit and newly sponsored by Chinese business news outlet Caixin, which recently took over from HSBC.
