Dow falls 530.94 points in China-led rout

The China Post - - FRONT PAGE -

U. S. share prices plunged more than 3 per­cent Fri­day as China’s eco­nomic prob­lems drove a ma­jor sell- off on Wall Street for a sec­ond day.

In its worst sin­gle ses­sion in nearly four years, the Dow Jones In­dus­trial Av­er­age lost more than 500 points, or 3.12 per­cent, while the broader S& P 500 gave up 3.19 per­cent and the Nas­daq Com­pos­ite shed 3.52 per­cent.

The rout fol­lowed sim­i­lar declines in Asian and Euro­pean mar­kets amid ris­ing fears that main­land China’s slow­down will stall growth world­wide and even hit the rel­a­tively strong U. S. econ­omy.

Lead­ing the drop among top com­pa­nies was the world’s largest firm by mar­ket val­u­a­tion, Ap­ple, which lost 6.1 per­cent, or about US$ 37 bil­lion in value.

But the car­nage went across the board of tech, energy, in­dus­trial and fi­nance com­pa­nies, all ex­posed sig­nif­i­cantly to a China- led down­turn in the global econ­omy: Mi­crosoft lost 5.7 per­cent, Chevron 4.4 per­cent, Bank of Amer­ica 3.7 per­cent, Boe­ing 3.9 per­cent, and Gen­eral Mo­tors 4.0 per­cent.

The Dow Jones In­dus­trial Av­er­age, which pow­ered to a se­ries of record highs this year, fin­ished down 530.94 points at 16,459.75. The two- day sell- off wiped out any gains made in 2015, tak­ing the in­dex of 30 blue chips — with Ap­ple in the lead — to its low­est level since Oc­to­ber last year.

The S& P 500 lost 64.84 points to 1,970.89, also tak­ing it back to lev­els of last Oc­to­ber. The Nas­daq Com­pos­ite, which had reg­is­tered the strong­est gains of the year, shed 171.45 points at 4,706.04, about 30 points be­low where it had ended in 2014.

“Sen­ti­ment

is

shift­ing

in a very neg­a­tive way and you re­ally are see­ing no place to hide to­day,” said David Levy of Ken­jol Cap­i­tal Man­age­ment.

Ken­jol said the sell- off was “over­done,” but added that, with­out some sort of pos­i­tive news, “there is no rea­son for buy­ers to step in and get long at this point.”

“You have to keep your seat­belt buck­led,” he said.

Pa­trick O’Hare of Brief­ing. com said that un­der­pin­ning the sell- off is in­vestors’ los­ing faith in the abil­ity of cen­tral bankers from Bei­jing to Washington to use mon­e­tary pol­icy to stim­u­late growth.

But O’Hare also pointed to overly high val­u­a­tions for U. S. shares re­cently given mod­est growth prospects in the U. S. econ­omy.

“A mar­ket trad­ing at roughly 17.5 times for­ward 12- month earn­ings is priced for much bet­ter things eco­nom­i­cally speak­ing that have yet to avail them­selves as the Fed­eral Re­serve had hoped they would.”

The sell- off in­ten­sity matched that in Europe, where ma­jor in­dices lost be­tween 2.8 per­cent and 3.2 per­cent.

“We have a chal­leng­ing eco­nomic sit­u­a­tion in China, which has now taken the ex­treme step of de­valu­ing its cur­rency to sup­port its econ­omy. That weak­ness is ric­o­chet­ing through emerg­ing mar­kets and the global in­dus­trial sec­tor,” said Lisa Emsbo- Mat­tingly, di­rec­tor of as­set al­lo­ca­tion at Fi­delity, in a client note.

Bond prices pushed up amid the bear­ish mar­ket turn and a 1.3 per­cent fall in the U. S. dol­lar ver­sus the euro, to US$ 1.1375. The yield on the 10- year U. S. Trea­sury fell to 2.05 per­cent from 2.07 per­cent, while the 30- year slipped to 2.74 per­cent from 2.75 per­cent. Bond prices and yields move in­versely.

AP

A screen above the trad­ing floor of the New York Stock Ex­change shows the clos­ing num­bers, Fri­day, Aug. 21.

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