Monday, August 24, 2015

Dow Dives 588 Points to 18-Month Low Amid Global Market Selloff

Following-up from earlier today, "Dow Falls 1000 Points on Opening Bell."

At the Wall Street Journal, "Dow Industrials Tumble 588 Points to 18-Month Low Amid Global Market Selloff":
U.S. stocks tumbled on Monday, with the Dow Jones Industrial Average dropping to an 18-month closing low in a tumultuous trading session that saw the blue-chip benchmark briefly plummet more than 1,000 points.

The Dow plunged as much as 1,089 points in the first six minutes of trading before paring losses as traders said mutual funds and other investors began stepping in to buy up beaten down stocks. More than 13.9 billion shares changed hands, making Monday the largest volume day since August 2011.

The Dow industrials ended down 588.40 points, or 3.6%, to 15871.35, its lowest closing level in 18 months.

The S&P 500 dropped 77.68 points, or 3.9%, to 1893.21, joining the Dow industrials in correction territory, defined as a decline of 10% from a recent peak. The Nasdaq Composite fell 179.79 points, or 3.8%, to 4526.25.

Traders attributed the early morning drop in part to big investors scrambling for ways to protect themselves against losses outside the U.S., as well as to a cascade of automatic selling by retail investors. Traders said the sharp morning declines triggered so-called stop-loss orders, which are designed to protect investors by instigating a sale once a stock falls to a certain level. They are typically used by brokers who manage money for retail investors.

The Dow’s tumble marked its largest one-day point decline ever on an intraday basis, as intensifying growth fears sparked steep stock-market losses world-wide. Large retail brokerages hosted calls with their legions of financial advisers, encouraging them to stay calm and possibly buy beaten down companies. Mutual funds and hedge funds also began scooping up stocks, traders said.

“When a big selloff comes, it tends to be herd mentality,” said Ryan Larson, head of U.S. equity trading for RBC Global Asset Management. “But once that herd gets out of the way, there can be some very good buying opportunities.”

Many investors said they remain optimistic about U.S. stocks and stepped in to buy shares.

“Stock prices have dropped sharply and fears have increased sharply,” said Kate Warne, investment strategist at Edward Jones. “But it’s really important to keep in mind while stock prices have changed and obviously emotions have changed, fundamentals for the U.S. haven’t changed. Even with China selling sharply and emerging markets selling off, we’re still seeing solid U.S. economic growth.”

Investors stampeded into relatively safe assets such as U.S. government bonds, the Swiss franc and the yen. The 10-year Treasury yield, a foundation for global finance and a key indicator of investors’ sentiment toward growth and inflation, was 1.997%, down from 2.052% Friday. Yields fall as prices rise.

Fears that China’s economy is slowing dramatically sparked the heavy selling in stocks around the globe in recent days. Beijing’s unexpected move to devalue its currency two weeks ago raised the alarm that the world’s second-largest economy may be in worse shape than many had thought. Since then, weak economic data have fueled worries that a drop-off in Chinese growth could cause a global slowdown...
Still more.