The Atlanta Journal-Constitution
Wall Street experiences its worst day since May
Regardless of cause, some analysts said the drop was due.
U.S. markets tumbled Monday amid investors’ concerns over troubles with one of China’s biggest property developers, the threat of a government shutdown and the Federal Reserve’s monetary policy. The Dow Jones industrial average fell more than 900 points before closing at 33,970.47, down 614.41 points, or 1.8%.
Stocks on Wall Street closed sharply lower Monday, mirroring losses overseas and handing the S&P 500 index its biggest drop in four months.
What happened
Worries about debt-engorged Chinese property developers — and the damage they could do to investors worldwide if they default — rippled across markets. Investors are also concerned that the U.S. Federal Reserve could signal this week that it’s planning to pull back some of the support measures it’s been giving markets and the economy.
The S&P 500 fell 75.26 points, or 1.7%, to 4,357.73, it’s biggest drop since May. At one point, the benchmark index was down 2.9%, the biggest decline since last October. The S&P 500 was coming off two weeks of losses and is on track for its first monthly decline since January. The S&P 500 has gone an unusually long time without a pullback of 5% or more.
The Dow Jones Industrial Average fell 614.41 points, or 1.8%, to 33,970.47. The bluechip index was briefly down 971 points. The Nasdaq fell 330.06 points, or 2.2%, to 14,713.90. The Hang Seng, Hong Kong’s main index, dropped 3.3% for its biggest loss since July. European markets fell about 2%.
“What’s happened here is that the list of risks has finally become to big to ignore,” said Michael Arone, chief investment strategist at State Street Global Advisors. “There’s just a lot of uncertainty at a seasonally challenging time for markets.”
What it means
The worries over Chinese property developers and debt have recently centered on Evergrande, one of China’s biggest real estate developers, which looks like it may be unable to repay its debts.
The fear is that a potential collapse there could send a chain reaction through the Chinese property-development industry and spill over into the broader financial system, similar to how the failure of Lehman Brothers inflamed the 2008 financial crisis and Great Recession.
Many analysts say they expect China’s government to prevent such a scenario, and that this does not look like a Lehman-type moment.
Besides Evergrande, several other worries have been lurking underneath the stock market’s mostly calm surface. In addition to the Fed possibly announcing that it’s letting off the accelerator on its support for the economy, Congress may opt for a destructive game of chicken before allowing the U.S. Treasury to borrow more money and the COVID-19 pandemic continues to weigh on the global economy.
Why it matters
Regardless of what the biggest cause for Monday’s market swoon was, some analysts said such a decline was due. The S&P 500 hasn’t had even a 5% drop from a peak since October, and the nearly unstoppable rise has left stocks looking more expensive and with less room for error.