The tumult began when the Dow opened Monday with a 1,000-point nosedive.
The U.S. unemployment rate stood at 5.3 percent in July, and as long as the labor market continues on a steady path, stock price declines are unlikely to seriously dampen consumer confidence and spending. Stocks staged a comeback that almost brought the Dow back into positive territory but that ultimately failed.
The economic slowdown in the world’s second-largest economy and worries about a lack of transparency in Chinese decision making are drivers of the global rout.
All 10 of the main groups in the S&P 500 gained.
Not to be outdone on Friday by the Dow, the Standard & Poor’s 500 index lost 3.19 percent, or 64.84 points, to close at 1,970.89 and the Nasdaq index of technology darlings dropped 3.52 percent or 171.45 points to close at 4,706.04.
In terms of percentage, Monday’s stock market losses in the U.S. were nowhere near the severity of the Black Monday crash in October 1987, when the Dow shed more than 22 percent of its value in a single trading session.
Stock prices for a number of iconic American companies declined dramatically in an instant.
The Dow fell 1,089 points within the first four minutes of trading as traders dumped shares.
About the same time, the price of benchmark U.S. crude oil was up $1.24 at $39.48 a barrel in trading on the New York Mercantile Exchange.
The dramatic selling began overseas. The FTSE 100 index of leading British shares dropped 4.7%. While the roots of the current selloff may be deep, much of the pile-in panic seems to have been sparked by fears that China’s economy, the second-largest in the world, is not going to deliver the growth figures once hoped for. “If someone is in their 50s or 60s they may have another view… wonder if it goes down any further will I have a chance to recover”, says Overton.
The big slump in commodity prices could turn out to be a boost for economies throughout the world, though. “The balance of the latest “real” data out of China suggests a slight acceleration of growth in domestic demand again – not a decline”, Nielsen says. Its enormous appetite for raw materials like oil, copper and iron ore fueled global growth, especially in emerging markets like Brazil that are rich in natural resources.
The Dow Jones Industrial Average finished the day 600 points down, as fears lingered over China’s ailing economy.
And it’s not just China weighing on stock prices.
Stocks have been on a bull run of more for more than six years, after bottoming out in March 2009 in the aftermath of the financial crisis and the Great Recession. Even at its lows on Monday, it was at 1,866.86. The surprise yuan devaluation a few weeks ago ignited this fire and the sense is that the global capital markets do not know what is next. “Therefore, there will be less of a risk of a financial collapse down the road”, El-Erian told CNN.