A screen above the floor of the New York Stock Exchange shows the closing numbers, Friday, August 21, 2015.
The Dow Jones industrial average suffered its worst loss in five years after the market plunged into a correction on Friday.
Shares in major Japanese exporters were also hard-hit as the yen strengthened against the dollar, with Bridgestone losing 3.2 percent and Toyota shares falling 3 percent. In the US, the selling started early and never let up. Oil field company Halliburton was neck and neck with Netflix for the title of worst performing stock this week.
US share prices have plunged more than three per cent as China’s economic problems drove a major sell-off on Wall Street for a second day. “This is about growth”. The index saw a 5.8% weekly fall, the steepest since September 2011. Last week, Beijing devalued the Chinese yuan, causing other emerging countries to panic that they will face tougher competition from lower-priced Chinese exports.
That was followed by more bad news for the markets after a survey showed the manufacturing sector on the Chinese mainland continued to shrink.
At 13:25 EDT (1725 GMT) the Dow Jones industrial average was down 321.43 points, or 1.89 per cent, at 16,669.26. That’s 10% off its high, a correction.
The Nasdaq Composite fell 153 points, or 3.2%, to 4,725 and is 9.7% below its July 20 peak.
Declines in European stocks were bigger.
“The hard thing is it’s easy to get out of the market, but it’s hard to get back in”, she said. “But a flatter curve can also signal a slowdown in future growth”, Ian Gordon, FX Strategist at Bank of America report, said in a note Friday.
The Fed, in minutes of its latest meeting released on Wednesday, widely agreed last month the economy was nearing the point where interest rates should move higher, but anxious lagging inflation and a weak global economy posed too big a risk to commit to “liftoff”. More than half of the S&P 500 have now entered correction territory, having fallen more than 10% from their 52-week highs, according to Forbes calculations.
Adding more pessimism into the market, US economic data came out weaker than expected.
Global markets extended losses on Friday. The consumer staples index fell 1.5 percent, moving into the red for the year.
The CBOE Volatility Index (VIX) is up 5 points, or 26.3%, at 24.18.
The S&P 500 dropped 3.2 per cent, the most since November 2011, to below 2000. Japan’s Nikkei 225 Index dove by 3%, while Hong Kong’s Hang Seng Index slumped by 1.5%.
Canadian fertilizer producer PotashCorp fell by 2.9% while US-based specialty chemicals producer Eastman Chemical declined by 2.6%. Deere fell 8 per cent to $83.34 after the tractor maker’s quarterly profit declined 40 per cent. Declining issues outnumbered advancing ones on the NYSE by 2,535 to 497. “Investors are scared and confused, and if you are an emerging market equity investor, probably close to suicidal”. Slower growth in China means their top customer no longer needs the commodities they sell.
Another worry that investors have is the U.S. weekly jobless claims statistic. With interest rates near zero in most economies, “If another recession comes, markets are anxious that governments may not be able to respond as flexibly”, Boston College economics professor Bob Murphy said.