Dow dives 1,000 points in early trading as global selloff deepens

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NEW YORK, NY - AUGUST 21: Traders work on the floor of the New York Stock Exchange (NYSE) on August 21, 2015 in New York City. The Dow fell over 500 points in trading today as global markets continue to react to economic events in China. (Photo by Spencer Platt/Getty Images)

NEW YORK  — America’s stock market is getting absolutely crushed. The Dow plunged more than 1,000 points at the open and the S&P 500 sank into correction territory on Monday as global fears about China’s economic turbulence mounted.

The Dow is on track to suffer its worst percentage decline since 2008, the beginning of the scariest financial crisis since the Great Depression.

The wave of selling began overseas. China’s Shanghai Composite plummeted 8.5%, wiping out all of its massive gains so far this year. Not only has an apparent bubble in Chinese equities popped, but the country’s economy may be slowing more than feared.

Last week’s big selloff gathered serious momentum after China said its manufacturing activity — a critical metric on growth — tumbled to a six-year low in July.

China is the world’s second-biggest economy. Its explosive growth in the last two decades has been the engine for the global economy. 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.

But that story has been completely derailed by China’s economic slowdown. Just how much China slows down matters greatly to investors.

Fears have grown so much about the health of China’s economy that the S&P 500, made up the largest U.S. companies, is now sitting in “correction” territory — a 10% decline from a recent peak.

Both the Dow and Nasdaq slipped into correction mode on Friday, the first since 2011.

The selling hasn’t been limited to stocks. Crude oil plunged below $39 a barrel on Monday for the first time since 2009. A global economic slowdown is eating into demand for oil at a time when supplies remain extremely elevated.

Another sign of fear: The 10-year Treasury yield slid below 2% on Monday. That’s the lowest level since April and a sign that investors are fleeing to the relative safety of American government debt. It also signals that Wall Street believes the Federal Reserve may have to delay its expected interest rate hike from September until later in the year or even 2016.

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3 comments

  • Dave

    This is what happens when you put a positive monetary valuation on something with a negative actual value (debt). Forget about recovery this time, there won’t be anything to bail anyone out with. It is over. The house of cards is finally coming down and being exposed for what it really is…pretense. Ever since Nixon abandoned the gold standard there has been nothing of any real tangible value holding up our economy. Sell-offs like this expose that very real vulnerability to the world. All we have been basing our economy on is debt…the *potential* collection of that debt and the *potential* collection of the interest involved is all we have. And since mathematically there is not enough money in all the world to cover all the debt….the whole economy is nothing more than a sham. A big con game that is now being ripped open for all the world to see.