The big selloff on Wall Street to start 2016 is now the
worst four-day start to the year ever for the broad U.S. stock
market following repeated waves of selling Thursday that
sent the Dow tumbling almost 400 points and thrust the Nasdaq back
into correction territory amid a global stock rout that started when China
halted trading in its market again following a 7% plunge. The Standard &
Poor's 500 stock index lost 2.4% to 1943.09. The S&P is down 4.93%
this year, eclipsing its prior worst four-day start of -4.48% back in 2000,
according to S&P Dow Jones indices. The Dow Jones industrial average lost
392 points, or 2.3%, to 16,514.10. Its 5.23% drop so far this year is also its
worst start ever.
The real drama was in the tech-heavy Nasdaq composite, which
plunged 3% to 4689.43, leaving it more than 10% below its July record close and
officially back in correction territory. The sledding continues to be
treacherous on Wall Street, which started the session already off to its worst
three-day start to a new year since the financial crisis in 2008. And China was
again the epicenter of Thursday's sell-off. Sparking angst was a freefall
in Chinese stocks at the start of trading Thursday, which triggered a shutdown
of the Chinese stock market about 30 minutes into the trading session --
marking the shortest trading day in the market's short history. It was the
second trading halt this week.
Stocks are selling off around the world because of major
volatility in China's stock market early in 2016. Fears of a bigger-than-expected
slowdown in the world's second-biggest economy are on the rise, which is a
negative for markets as China has been one of the world's biggest drivers of
growth in recent years. Fears range from China exporting recession to the world
to China fomenting another crisis in global markets. There is also great
concern that Chinese authorities are making the situation worse -- and
that China's willingness to let its currency, the yuan, weaken is
signaling an even weaker economic situation in China.
U.S.-based strategists say the massive volatility to start
the new year is not the start of another 2008-style financial crisis, but
rather a big correction very much similar to the big China-inspired drop this
past August. The summer swoon sparked by a similar stock meltdown in China and
fears about Chinese growth, of course, pushed the U.S. stock market into its
first 10%-plus drop, or correction, in four years. The S&P 500 fell 12.4%
from its high to low this summer.
Many market watchers say the steps Chinese authorities are
taking to stem the panic -- adding circuit breakers to cool things off when
markets fall a lot very fast and restricting selling of shares by big investors,
to name a few -- is actually adding to the panic and making volatility worse.
The Shanghai composite index, a Chinese stock gauge filled
with local Chinese shares that are owned mainly by local indvidual investors in
China, fell another 7% today, extending its losses in the first four days of
the year to 11.7%. The CSI 300 of companies listed in Shanghai and Shenzhen
fell 7.2% in the first 30 minutes of trading Thursday, tripping a
circuit-breaking mechanism that went into effect this week.
The selloff in China quickly spread around the world,
although the losses have been trimmed in Europe, as well. In Europe, Germany's
DAX index was down 2.3%, after an earlier plunge of 3.5%, France's CAC 40 was
down 1.7% after an earlier drop of 2.8% and Britain's FTSE 100 was off 2.0%.
Japan's Nikkei index tumbled 2.3% to close at 17,767.34.
Hong Kong's Hang Seng index dropped 3.1% to finish at 20,333.34.
Adding to the market's woes was another drop in oil prices
as U.S. benchmark crude fell more than 3% earlier Thursday to below $33 a
barrel. But U.S.-based crude has also bounced back and is down closer to 1%.
Brent crude had fallen 2.5% to $33.39 a barrel.
This was a troubling development after U.S. markets posted
another turbulent session Wednesday as investors got blindsided by yet another
early-year shock: claims from North Korea that it successfully tested a
powerful hydrogen bomb. 2016 has been awful so far, with the Dow Jones
industrial average logging its worst three-day stretch in a new year since the
financial-crisis days of 2008.
The news out of North Korea rattled investors around the
globe. The latest geopolitical flare-up in an increasingly volatile world
prompted investors to sell stocks and reduce risk. But more troubling about
China's plunge is that the nuclear saber-rattling came just days after the
first shock of the year: a major plunge in shares of mainland China stocks and
renewed global growth fears sparked by weak manufacturing readings in China and
the U.S. A weaker-than-expected reading today on China's services economy --
which hit a 17-month low -- added to worries about the global economy.
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