Led by an 8.5 percent drop in China’s Shanghai composite index, global stock markets have taken a dive. Shortly after opening, the Dow Jones index fell by 1,000 points, or 5 percent. About an hour into the trading session, the market had leveled off, losing about 400 points, or a little more than 2 percent of its value.
But the roller-coaster continued, with stocks incurring new losses later Monday.
“Panic spread to European markets, with the pan-European FTSEurofirst 300 off as much as 3 percent in early London trading. All major bourses were off a similar amount. The index has shed over $1 trillion in market value in August so far.
“Japan’s Nikkei 225 index also finished at its lowest closing level since February 23, as a double whammy of China-related fears and a rejuvenated yen brought the bourse down by its biggest one-day drop in more than 2 years.”
Of course, in the U.S., all this comes after a brutal week on Wall Street. On Friday, the Dow closed 531 points lower — in correction territory for the first time since 2011.
We’ll update this post often as the markets take in all this news.
Update at 4:05 p.m. ET. Market Staggers To A Close
The Dow Jones index has closed at 15,871.28 — a drop of 588.47, or 3.58 percent, for the day. The benchmark started Monday’s session at 16,459.75 and fell more than 1,000 points before recovering some of those losses.
Update at 3:08 p.m. ET. After Rebound, Another Drop
The final hour of a long day is beginning. More than a few traders and investors are no doubt looking forward to happy hour after the stock market closes at 4 pm ET.
And it appears they’re going to need the barkeep to pour heavy: prices are dropping fast again. The Dow Jones industrial average is down about 600 points to about 15,860. That’s about a 3.6 percent drop.
The fade is disappointing after the midday come back. The Dow had managed to scratch its way back to only about a 100-point loss, but now it’s down, down, down.
The market close should be interesting. Get out your popcorn.
Update at 2 p.m. ET. How Will The Markets Close?
Late summer is a popular time for roller-coaster rides, but it’s much more fun at an amusement park than on Wall Street.
Up and down, up and down, lots of screaming – that’s the stock market this summer. Back in mid-May, the Dow Jones industrial average was up at nearly 18,300. And then weeeeee, down we went in early June. Back up again in late June, another decline, then a July peak of 18,120.
August brought mostly dips – until suddenly, that stomach-turning, hands-in-the-air screaming plunge began in recent days. As investors settle in for the final two hours of trading on this bleak day, the Dow is down about 350 points, or 2.1 percent, to about 16,100.
Very hard to say right now how the wild ride will end at 4 pm. We might be laughing and relieved at the finish — or crying and calling for our mommies.
Update at 12:45 p.m. ET. Looking Better:
U.S. stocks, and even some commodities, are starting to look a little better as the trading day continues. When the stock market first opened, the Dow Jones industrial average took a swan dive, falling about 1,000 points within minutes. But as of the midpoint in the day, the average was down only about 130, at about 16,330.
Normally, a hundred-point drop would be seen as bad news, but after the morning’s wild plunge, investors took some comfort in seeing the Dow claw its way back.
For commodities, prices are still falling, but at least there were some signs of a small rebound. For example, both corn and wheat ticked up a little, even though prices remain far below where they were in recent years. Lumber seems to be the day’s biggest loser with prices down about 10 percent.
Update at 12:06 p.m. ET. Stocks Around The World Are Down:
If misery loves company, then here’s some comfort: Stock prices all over the world are down sharply too.
This morning, the U.S. stocks lost nearly 3 percent of their value, but European and Asian stocks did even worse. Their trading hours are over for Monday, and now their investors can lick their wounds and ponder what’s next for the week.
The STOXX Europe 600, a measure of European stocks, fell more than 4 percent, while the Shanghai Composite dropped 8.5 percent, marking the biggest one-day drop there since 2007.
Update at 11:16 a.m. ET. How Will This Affect Consumer Demand?
Consumer demand has been slow to grow throughout this six-year economic recovery. So now the big question that economists are pondering is: Will cheaper food and fuel this fall help consumers spend more for back-to-school and holiday shopping?
Or will the negative “wealth shock” discourage them? In other words, will families look at their 401(k) retirement savings and think, “Yikes. We’d better not spend much because we’re not as well-off as we thought”?
This year’s low inflation and low interest rates are good spurs to consumer spending. But shrinking savings and frightening headlines are certainly not confidence builders. Economists have to try to get into consumers’ heads and wallets to figure out how they will interpret the events of August. Will it be a signal to shop more or spend less?
Meanwhile, the stock market continues to rattle nerves. Pretty much everything that helps your savings — such as stock mutual funds and 10-year Treasury yields — are down on this difficult morning. The Dow Jones industrial average is off roughly 450 points to around 16,000. That’s down nearly 3 percent for the day.
Update at 11:08 a.m. ET. On The Positive Side, Gas Prices Are Down:
The stock market rout may not be doing much for retirement savings, but the oil price plunge may do a lot to help consumers — or at least those who drive. According to Gasbuddy.com, a website that tracks gasoline prices, the pump price is falling, down nearly 2 cents a gallon since Sunday.
The national average price is now $2.59, nearly 85 cents a gallon less than on this same date last year.
Back in the summer of 2008, the average price was $4.10. If you adjusted that for inflation, the price would be about $4.54. In other words, you are actually spending about $2 a gallon less than in the summer of 2008. That’s bound to help with this year’s back-to-school spending.
Unless, of course, you happen to be trying to hang on to an oil field job.
Update at 10:30 a.m. ET. Commodities:
Most headlines are focused on the stock market rout, but the bigger news may actually be about commodity prices. Pretty much anything you can buy in bulk — corn, copper, wheat, oil, aluminum — is way down.
In fact, the Bloomberg Commodity Index, which includes prices for 22 raw materials, sank to the lowest level since August 1999. As of 10:30 a.m., the index was down nearly 2 percent to 173.66. Over the past year, the index has dropped by more than 31 percent.
So if you are a miner, driller or farmer, 2015 is turning into a year you’d rather forget. Lots of those workers already are losing jobs, from the West Virginia coal mines to the Texas oil fields. In the wheat fields of Oklahoma and Kansas, farmers are facing much tougher times.
Update at 10:15 a.m. ET. A Rebound:
After a frightful opening, stock prices appear to be rebounding, a hopeful sign to many.
Within a few minutes of opening, the Dow Jones industrial average had dropped about 1,000 points. It had never before lost even 800 points in one day. But then again, the DJIA has been higher recently than any time in history, so as a percentage drop, this plunge was no record.
Following that initial, stomach-turning drop, prices improved. The DJIA was off only about 450 to around 16,000 within 45 minutes of opening. That’s still down nearly 3 percent from Friday’s depressing close, but at least the plunge stopped.
No matter how you look at it, this has been a terrible month for stocks. On Twitter, a lot of people are using the #BlackMonday hashtag — a reference to the “black” trading days first made famous in 1929 when Wall Street crashed. That may be a little melodramatic, but without question, it’s a tough time for nervous investors.
Update at 10:14 a.m. ET. ‘A Nasty Correction’:
As The New York Times puts it, the big question about all this is whether it portends a long-term slump for the world’s economies.
One analyst doesn’t think so:
“Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels, said there was no sense that an apocalyptic sell-off was at hand, with the United States and European economies able to withstand a bout of turmoil.
” ‘We see this as a very nasty correction,’ he said, ‘not the start of a new bear market.’ “
That said, the global stock market has lost nearly $10 trillion in value since June 3.
Update at 9:36 a.m. ET. A Bloody Opening:
At one point Monday morning, the Dow Jones had been down more than 1,000 points — more than 5 percent.
Of course, there is still a great deal of the day to go, but what’s clear is that we’re in for a wild ride today.
Update at 8:30 a.m. ET. Two Big Issues:
As Bloomberg sees it, that correction has been caused by two things: The U.S. finally succumbed to the Chinese rout and investors are finally starting to see a Federal Reserve interest hike as a reality.
“Speculation had been building all year for the Federal Reserve to raise interest rates in September for the first time since 2006, following the end of quantitative easing in 2014. Traders are now pricing in less than a one-in-three chance the central bank will act next month, from about 48 percent just before the yuan devaluation.
” ‘The chickens are coming home to roost,’ [Thomas Thygesen, SEB’s head of cross-asset strategy] said. ‘We’ve been too hopeful that Fed tapering didn’t matter, that they could hike interest rates and we’d still have a healthy economy. Since the Fed stopped bond purchases, they’ve been choking the life out of global manufacturing and that matters most for commodities and emerging markets.’ “
We’ll update this post as the markets open in the U.S.