Investors stung by a freefall in China’s stock market sent US equities tumbling 4 percent on Monday in a rout that enmeshed major indices worldwide.
The Dow Jones industrial average briefly slumped more than 1,000 points, its most dramatic intraday trading range ever while the S&P 500 formally entered a correction despite a dramatic rebound by Apple.
Monday’s drop followed an 8.5 percent slump in Chinese markets, which sparked a selloff in global stocks, along with oil and other commodities, Reuters reports.
Hong Kong’s Hang Seng index futures were down 2 percent and Nikkei futures were down 6 percent, suggesting there may be more losses in store when trading resumes in Asia on Tuesday.
European stocks closed off 5.4 percent after Asian shares slumped to three-year lows when a three-month-long rout in Chinese equities threatened to get out of hand.
Wall Street had stayed in s narrow range for much of 2015 but volatility jumped this month as investors became increasingly concerned about a potential stumble in China’s economy and after Beijing surprisingly devalued its currency.
Some investors unloaded stocks ahead of the close after looking to make money from volatile price swings earlier in the session.
“If things don’t settle down in China, we could have another ugly open tomorrow and you wouldn’t want to be caught holding positions you bought this morning,” said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin.
Apple chief executive Tim Cook took the unusual step of reassuring shareholders about the iPhone maker’s business in China ahead of a dramatic 13 percent drop and rebound in its stock, which closed down just 2.47 percent at US$103.15.
The Dow Jones industrial average closed down 588.4 points, or 3.57 percent, at 15,871.35. The S&P 500 lost 77.68 points, or 3.94 percent, to 1,893.21, putting it formally in correction mode.
An index is considered to be in correction when it closes 10 percent below its 52-week high. The Dow was confirmed to be in a correction on Friday.
The Nasdaq Composite dropped 179.79 points, or 3.82 percent, to 4,526.25, also in correction.
Preliminary data from BATS Global Markets show that there were 1,287 trading halts on US stock exchanges due to excessive volatility or the tripping of circuit breakers, far more than usual.
The S&P 500 index showed 187 new 52-week lows and just two highs, while the Nasdaq recorded 613 new lows and eight highs.
“Emotions got the best of investors,” said Philip Blancato, chief executive at Ladenberg Thalmann Asset Management in New York.
“The conjecture that the Chinese economy can propel the U.S. economy into recession is ridiculous, when it’s twice the size of the Chinese economy and is consumer-based.”
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