U.S. stocks slump; Dow briefly plunges 1,000 points
New York — U.S. stocks slid again Monday, with the Dow Jones industrial average briefly plunging more than 1,000 points in a sell-off that sent a shiver of fear from Wall Street to Main Street.
Stocks regained some of that ground as the day wore on, but the Dow finished with a loss of 588 points, the eighth-worst single-day point decline and the second straight fall of more than 500.
The slump — part of a global wave of selling touched off by signs of a slowdown in China — triggered worries among Wall Street professionals and among ordinary Americans who have been saving for retirement or a down payment on a house.
With the lease on her car up, health insurance worker Deirdre Ralph of Wayne, New Jersey, had planned to get a less pricey vehicle and invest the savings. Now she’s having doubts.
“That money, I wanted to take and put it toward my retirement,” said Ralph, 61. “Should I? Or should I just have a great old time?”
The Standard & Poor’s 500 index also fell sharply shortly after the opening bell, entering “correction” territory — Wall Street jargon for a drop of 10 percent or more from a recent peak. The last market correction was nearly four years ago.
The Dow ended up losing 588.47 points, or 3.6 percent, closing at 15,871.35. The S&P 500 index slid 77.68 points, or 3.9 percent, to 1,893.21. The Nasdaq composite shed 179.79 points, or 3.8 percent, to 4,526.25. The three indexes are down for the year.
“There is a lot of fear in the markets,” said Bernard Aw, market strategist at IG.
U.S. stocks have been on a bull run for more than six years, after bottoming out in March 2009 in the aftermath of the financial crisis and the Great Recession. The rout began in China last week and continued Monday as the country’s main stock index sank 8.5 percent.
China concerns aside, U.S. stocks have been primed for a sell-off for several months, said Jim Paulsen, chief investment strategist and economist for Wells Capital Management.
“I’ve been of the view since late last year that this market is in a vulnerable position,” he said. “It’s gone almost straight up for six years.”
Stocks have kept climbing even as corporate earnings growth has slowed. The price-earnings ratio for the S&P 500, a measure of how much investors are willing to pay for each dollar of company earnings, climbed as high as 17.2 in March. That was the highest level in at least a decade, according to FactSet.
The Dow plummeted 1,089 points Monday within the first four minutes of trading as traders dumped shares. But the fire sale was short-lived. A wave of buying by bargain-hunters cut the Dow’s losses by half just five minutes later.
The U.S. market slide was broad. The 10 sectors in the S&P 500 headed lower, with energy stocks recording the biggest decline, 5.2 percent, amid a continued slump in the price of oil. The sector is down almost 25 percent this year.
As scary as the sell-off was, the Dow’s decline doesn’t even make the list of the Top 10 biggest drops in percentage terms.
U.S. Treasurys surged as investors bought less risky assets. The yield on the benchmark 10-year note fell to 2.01 percent from 2.04 percent.
Oil, commodities and the currencies of many developing countries also tumbled on concerns that a sharp slowdown in China might hurt economic growth around the globe. Crude oil prices closed below $40 a barrel for the first time since early 2009. Gold and silver prices also fell.
Worries about a China-fueled global economic slump sent markets overseas lower, as well.
In Europe, Germany’s DAX fell 4.7 percent, while the CAC-40 in France slid 5.4 percent. The FTSE 100 index of leading British shares dropped 4.7 percent.
In Asia, Japan’s Nikkei fell 4.6 percent, its worst one-day drop since in over 2½ years. Hong Kong’s Hang Seng index fell 5.2 percent, Australia’s S&P ASX/200 slid 4.1 percent and South Korea’s Kospi lost 2.5 percent.
The Shanghai index suffered its biggest percentage decline in 8½ years. China is facing a slowdown in economic growth, the banking system is short of cash, and investors are pulling money out of the country.