Though the declines eased significantly as the morning went on, the market plunge sent a shiver of fear through Americans with retirement accounts or saving to buy a home that the bull market is over.
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The Dow Jones industrial average rose 200 points, or 1.3 percent, to 15,866 as of noon Eastern.
The slide in the Dow over the past week wiped out some $2 trillion in stock value in the U.S.
The massive selloff, which kicked into high gear last week when the Dow tumbled more than 1,000 points and sank into official correction territory. Treasurys surged as investors bought less risky assets.
Nonetheless, the confidence was very much short lived as investors were engaged by the angst of the Chinese debt problem. A wave buying cut the Dow’s losses by half just five minutes later. Other so-called “shock absorbers” were the Fed holding off on interest rate hikes, oil prices bottoming out, pricey stocks getting less pricey and continued signs of strong economic growth in the U.S.
People watch Indian stock market indices on a display screen on the facade of the Bombay Stock Exchange (BSE) building in Mumbai, India, Tuesday, August 25, 2015. “Nothing has changed in the global economy; while the Chinese move is supportive, it didnot kick off the rally”.
Investors aren’t too anxious about the U.S. They’re concerned about China.
The 10 sectors in the S&P 500 declined, with utilities falling the most, 3.2 percent.
METALS: Gold fell $13.70 to $1,124.60 an ounce.
“The slowdown in China could lead… to a slower global growth rate and less demand for the US economy”, Dudley said. “It’s gone nearly straight up for six years”. The S&P 500 has gone up a stellar 220% since March of 2009 when stocks bottomed out after the financial crisis.
On Monday, the Chinese government’s main economic planning body, the National Reform Development Commission, also tried to reassure investors. It is expanding at about 2% a year and unemployment is back to the lows it was at before the Great Recession. That was the highest level in at least a decade, according to FactSet. The state-run news agency Xinhua said China was experiencing a “Black Monday” after the stock’s lowest decline in 8 years was recorded. It fell 87 cents a barrel on Friday.
The big slump in commodity prices could turn out to be a boost for economies throughout the world, though.
“Soon I sensed a hint of danger, because everyone around me was investing and acting like they had become the “god of stocks” overnight”, he said. “This is more of a stimulative event for the global economy”.
China’s dimming outlook is drawing calls for more economic stimulus from Beijing, though earlier government efforts to stop the sell-off in stocks appear to have done little to stabilize markets.
In Europe, Germany’s DAX fell 4.7 percent, while the CAC-40 in France slid 5.4 percent.
China’s own benchmark, the Shanghai Composite Index, dropped late in the day, losing 1.3 percent after a volatile series of ups and downs.
In Asia, Japan’s Nikkei fell 4.6 percent, its worst one-day drop since in over 2 1/2 years.
The day saw mixed movements in major bourses-Shanghai fell another 1.27 percent and European shares, represented by the Eurostoxx 50 blue chip index, lost 1.47 percent while Tokyo added 3.2 percent.
Underlying the gloom in China is the growing conviction that policymakers and regulators may lack the means to staunch the losses in that nation.
“There is a lot of fear in the markets”, said Bernard Aw, market strategist at IG.
The dollar rose to 119.52 yen versus 118.66 yen late Wednesday. Oil retreated to about $39 a barrel, leaving it down 17% this month alone.
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Despite Monday’s stock market numbers, Wilson said those in the U.S. should not panic.
