Posted on 08/24/2015 1:10:39 PM PDT by Red Badger
The stock market whipped between nauseating drops and roaring comebacks on Monday in a historic day of turbulence.
Seized by fears that the Chinese economy is not as healthy as it appeared to be, investors sold with abandon at the opening bell and sent the Dow Jones industrial average down almost 1,100 points, the biggest decline on record in a trading day.
Then the market staged a dramatic comeback and almost erased its losses, coming within about 115 points of break-even. By late afternoon, stocks were sinking again — and the Dow closed down nearly 600 points.
"The movements we've seen have been so fast and so large," Peter Costa, the president of the trading firm Empire Executions, said on CNBC. "You're talking about 75, 100-point moves in two minutes. It's been extremely fast, and it's happened very, very quickly."
The Vix, a market reading that measures volatility and is known as the "fear index," hit 53. The last time it was over 50 was in March 2009, when the market hit its bottom after the financial crisis.
Investors around the world are worried about China, the world's second-largest economic power and a huge market for American products. China devalued its currency two weeks ago and has shown other signs of economic weakness.
The drop at the opening bell amounted to 6.6 percent, so steep that the New York Stock Exchange invoked a little-known rule to prevent panic selling.
"Fear has taken over," Adam Sarhan, CEO of the investment company Sarhan Capital, told CNBC. "The market topped out last week."
Last week was the worst for the market in four years. The Dow entered what is known as a market correction — a 10 percent decline from its all-time high, reached in May.
Then, on Monday, selling swept the globe. The Shanghai stock market closed down more than 8 percent, and has crashed almost 40 percent from its high earlier this year. The Nikkei index in Japan closed down more than 4 percent. London, Paris and Frankfurt posted similar declines.
Get live market quotes from CNBC
In the United States, few stocks were immune — especially not companies that do big business in China. Apple, which closed Friday at $105.76, dipped to $92 on Monday. Yum Brands, which owns KFC, closed at $79.70 on Friday and sank to $71.39 on Monday.
"What's a company that's doing business with China actually worth right now?" JJ Kinahan, TD Ameritrade's chief strategist, told The Associated Press. "When you're not sure, you tend to sell."
The gap between the Dow's highest and lowest points of the day was 1,089 points — a bigger swing than on the most volatile day of the 2008 financial crisis and during the 2010 "flash crash."
If the market comes back, it could make history, even in percentage terms. Only twice before has the average dropped 6 percent in any day and then recovered to close down less than 3 percent.
One was on Oct. 10, 2008, during the financial crisis, when the Dow plunged 8.1 percent and closed down 1.5 percent. The other was on Oct. 20, 1987, the day after the Black Monday market crash, when the Dow plummeted 7.1 percent and closed up 5.9 percent.
Analysts tried to point out that the fundamentals of the American economy had not changed — steady growth, stable banks and an unemployment rate of 5.3 percent. At the last market correction, in April 2011, unemployment was 9.1 percent.
Seeking to calm the public, Josh Earnest, the White House press secretary, focused on the "resiliency" of the U.S. economy. He said the Treasury Department was keeping a close eye on global markets.
"The president is very mindful of how this would be a particularly bad time for a self-inflicted wound," he said, urging Congress to pass a budget and avoid a government shutdown.
One market-watcher, Jim Paulsen, chief investment strategist and economist for Wells Capital Management, said stocks were primed for a sell-off. The S&P 500 tripled from its low in March 2009 to its record high earlier this year.
"I've been of the view since late last year that this market is in a vulnerable position," Paulsen told the AP. "It's gone almost straight up for six years."
They don’t even bother with ‘paper’ anymore, it’s just 1’s and 0’s magically appearing on a computer screen........................
Shouldn’t that be ‘John Gevalt’?!?!...................;^)
Only if you have lots of ammo...................
What he said is is little gulp inducing.
I am going to the basement now and checking the rice, beans and spam. /:
China? How about the lies are now beyond fantasy. The corporations have been gutted by insider salaries, bonuses, insider stock buybacks on credit, etc. Just by looking a gross sales or revenue tells the real story.
I did not need to look past the first page on Google — anytime you see somebody hawking gold and silver, well those folks make their money by inducing panic buying of precious metals. I don’t know about his track record, but profiting off of doom and gloom? Yep — anyone trying to sell you gold and silver is doing that.
Democrats. They also think the USA economy is in great shape and that we're at full employment.
Interesting that he moved BACK from Costa Rica in 2011.
So a stock market broker could jump off a tall building and have their losses recouped by the time they hit ground. Lol.
“just 1’s and 0’s magically appearing on a computer screen”
Not exactly magic: someone still has to hit the one and zero keys on the Fed keyboards. (I have it on good authority that those keys have to be replaced on a daily basis by Fed IT experts.)
People don’t scare as easy in Central America as they do here.
I found it perplexing that someone so sure of imminent societal breakdown came back to the epicenter.
Crazy day
All gains for the past 12 months have been wiped out.......................
15,666.17
-205.18 (-1.29%)
Today’s close................................
650 point drop from the highs of the day...
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