Dow recovers from its intra day 1,000 point drop
U.S. stocks saw their highest trading volume in about four years on Monday, 25 August 2015 as stocks posted their worst declines of the year in a fifth straight day of brutal declines for the market sparked by China growth fears. Investors are fretting that China's stock woes underscore weakness in the world's second largest economy.
The Dow Jones Industrial Average ended down 588 points, or 3.6%, at 15,871.28, after staging a stunning 1,000-point drop at the open of Monday's trading session. The Nasdaq Composite Index tumbled 179.79 points, or 3.8%, to 4,526.25 and the S&P 500 fell 77.68 points, or 3.94%, to 1,893.21.
The Monday retreat began unfolding shortly after Asian markets opened for action with continued concerns about global economic growth weighing on investor sentiment. China's Shanghai Composite paced the overseas weakness, plunging 8.5%, after the weekend went by without direct policy intervention from the People's Bank of China. Instead, pension funds managed by local governments were allowed to invest in the stock market, but that development was all but ignored.
Monday's plunge in the China stock market is the largest one-day drop since the financial crisis that began in 2008. There are news reports that China's central bank is ready to inject massive liquidity into the Chinese financial system in order to increase lending and stop the sell-off in China equities. The world market place is worried about a slowdown in China's economy, which is the world's second-largest.
Japan's Nikkei stock index was down by nearly 5% on Monday. European stock indexes were down around 3% on the day, at their worst levels, before rebounding by the close. The market place is concerned about a world financial market contagion setting in.
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Secondary world currencies also shuddered Monday, as cash is flowing out of the periphery currency markets and into perceived safer-haven currencies and assets.
All of the above have called into serious question the ability of the Federal Reserve to raise U.S. interest rates any time soon. Later this week U.S. Federal Reserve officials meet in Jackson Hole, Wyoming for their annual meeting to discuss monetary policy and other economic issues.
Bullion prices failed to score any gains on Monday, 24 August 2015 despite its reputation as a refuge in times of market turmoil, while other metals took a hit on the latest rout in global stock markets. Gold prices ended the U.S. futures trading session modestly lower in a wild trading day in the market place Mondayalthough the gold market did not see high volatility. The yellow metal did hit a six-week high in morning dealings, after the U.S. stock market sold off sharply right at the opening.
Gold for December delivery lost $6, or 0.5%, to settle at $1,153.60 an ounce. Silver for September delivery shaved off 53.9 cents, or 3.5%, to $14.762 an ounce.
Gold prices lost altitude just before midday when the U.S. stock indexes bounced well up from their early spike lows. Gold was also pulled to the downside by the major sell-off in the raw commodity sector recently.
Crude oil prices dropped once again at Nymex on Monday, 25 August 2015. The plunge in oil prices accelerated Monday in line with the selloff in global financial markets, with West Texas Intermediate crude futures settling under $39 a barrel as investors remain shaken about prospects for global economic growth. Oil prices have been under pressure for several months due to oversupply concerns, but the slump has deepened in recent weeks on fears of a sharp slowdown in the Chinese economy and its impact on global markets and energy demand.
WTI crude for delivery in October fell $2.21, or 5.5%, to settle at $38.24 a barrel on the New York Mercantile Exchange. That was the lowest level for a most-active contract since February 2009. Nymex prices had tapped a low of $37.75.
The intraday retreat in Treasuries occurred as stocks attempted a recovery, but the market met renewed selling and returned into the lower half of its trading range by the close.
Monday's aggressive selloff invited above-average participation with more than 1.6 billion shares changing hands at the NYSE floor.
Investors did not receive any economic data today, but a few reports will be released tomorrow. The Case-Shiller 20-city Index for June (consensus 5.1%) and the June FHFA Housing Price Index will both be released at 9:00 ET while July New Home Sales (consensus 511K) and August Consumer Confidence (expected 93.1) will be reported at 10:00 ET.
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