Stock market endures worst day in 18 months
US stock market has worst day in 18 months over worries about China, global economic growth
By Ken Sweet, AP Business Writer
3 hours ago
The global rout started in China, where sharp declines in energy and property stocks pushed the Shanghai Composite down more than 3 percent. That selling soon spread to European and U.S. markets, where the Standard & Poor's 500 index moved further below a closely watched trading level.
Investors, facing screens full of red, retreated to their usual places of safety: bonds, gold and cash.
"The emerging markets really got slammed overnight and that quickly
spread to the rest of the world," said J.J. Kinahan, chief strategist at
TD Ameritrade.The Dow plunged 358.04 points, or 2.1 percent, to 16,990.69. The S&P 500 lost 43.88 points, or 2.1 percent, to 2,035.73 and the Nasdaq composite lost 141.56 points, or 2.8 percent, to 4,877.49.
It was the biggest percentage decline for the Dow and S&P 500 since February 2014. The blue-chip average is now at its lowest level since October 2014.
Buyers of stocks were few and far between. Selling outweighed buying by a ratio of more than eight to one in heavy trading. Still, even with the steep sell-off, the S&P 500 is down just 4.5 percent from its record close of 2,130.82 on May 21.
As the selling picked up, investors moved money to traditional havens in times of uncertainty.
Gold rose $25.30, or 2.2 percent, to $1,153.20 an ounce, the metal's best day since April. Demand for ultra-safe U.S. government bonds rose, pulling down the yield on the benchmark 10-year Treasury note to 2.07 percent from 2.13 late Wednesday. The bond was trading at a yield of 2.19 percent only two days before, and the decline since is major move.
Worries over China, the world's second-largest economy, spurred Thursday's losses. The Shanghai Composite Index dropped 3.4 percent. Chinese shares have had a wild ride this week and that has raised uncertainty about Beijing's ability to stabilize the market and its surprising devaluation of its currency.
That devaluation has caused other countries to devalue their own currencies, notably the oil-rich country of Kazakhstan and the Southeast Asian manufacturing center of Vietnam.
Strategists and traders, noting the lack of major U.S. economic news on Thursday, said the heavy selling of stocks was also likely tied to programmed selling after the S&P 500 moved below one of the most closely watched indicators, its 200-day moving average.
While many investors pick and
choose stocks based on a company's business outlook, there is an
entirely different class of trader who relies on such technical
indicators to make investment decisions.
"I see this drop as likely because we crossed the 200-day moving
average, and that's causing us to have further selling," said Scott
Wren, chief global equity strategist at the Wells Fargo Investment
Institute.
Media stocks were hit
particularly hard. Walt Disney shares fell $6.43, or 6 percent, to
$100.02. Analysts are concerned that viewers are choosing to move away
from cable, which could hurt lucrative Disney properties such as ESPN.
Viacom, owner of CBS, fell 6 percent as well and Twenty-First Century Fox fell 4 percent.
The price of benchmark U.S. oil
rose slightly but remains near its low point of March 2009. U.S. crude
rose 34 cents to $41.14 in New York. Brent crude, a benchmark for
international oils used by many U.S. refineries, fell 54 cents to $46.62
in London.
In other futures trading, wholesale gasoline fell 2.4 cents to close
at $1.535 a gallon. Heating oil fell 2.2 cents to close at $1.496 a
gallon. Natural gas rose 3.9 cents to close at $2.755 per 1,000 cubic
feet.In metals, silver rose 34 cents to $15.52 an ounce and copper rose 4 cents to $2.32 a pound.
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