This was how the Dow Jones average looked at noon ET.
The Dow Jones Industrial Average fell nearly 1,100 points on the opening Monday to 15370.33. It was the worst intraday loss ever. It had taken back more than 700 of those points later in the morning and has recently been trading around 16,250. The market remains volatile, however.
In mid-May, at its all-time peak, the Dow closed at 18,312.39. On Friday, Aug. 21, the Dow lost 531 points, putting it 10 percent below the peak, making it a market correction. In the view of most, but not all, analysts this plunge marks the end of one of the longest U.S. bull markets in history. The market passed the 18,000 mark in February and, until two months ago, only a handful of "bears" were naysaying the possibility of its soon reaching 19,000.
A key element of the drop is fear that the slowing of the economy in China is a lot worse than many had earlier figured. The surprise move of the government there to devalue its currency sparked analysts and investors to worry that the slowdown there could spark a global economic slowdown. Many have headed toward safe investments, in particular U.S. Treasuries and bonds.
The Wall Street Journal (behind a paywall) reported:
China’s Shanghai Composite sank 8.5% on Monday, entering negative territory for 2015, having risen as much as 60% to its June peak. Japan’s Nikkei benchmark tumbled 4.6%.
In Europe, the Stoxx Europe 600 fell 4.6% and Germany’s DAX dropped 3.7%. Germany’s stock market, which contains many car makers and industrial firms with a big chunk of their sales in China, has been among the worst-hit by the recent selloff.
While investors worldwide have been heading for safe havens for their money over the past few months, some analysts say this is not so worrisome as others would have it:
“Stock prices have dropped sharply and fears have increased sharply,” said Kate Warne, investment strategist at Edward Jones. “But it’s really important to keep in mind while stock prices have changed and obviously emotions have changed, fundamentals for the U.S. haven’t changed. Even with China selling sharply and emerging markets selling off, we’re still seeing solid U.S. economic growth.”
But put 10 people in a room to discuss the economy and you'll get a dozen opinions.
One major impact on the world economy always is the price of oil, which has also plummeted sharply this year. U.S. light crude has been trading below $40 a barrel today, and benchmark Brent oil is also trading lower, in the $43 range. Both are more than 15 percent below their prices at the beginning of August. While a shift to cheaper oil can spur more economic development—climate change be damned—it also can put a lot of people in the unemployment line. Layoff announcements since the beginning of the year have risen sharply, with more than 60,000 lost jobs in the U.S. attributed to the oil-price drop.
The slowdown of China's economy could take oil prices still lower.