Stocks plunge to near ‘correction’ territory
Growing concerns about a slowdown in China shook markets around the world on Friday, driving the U.S. stock market to its biggest drop in nearly four years.
The rout started in Asia and quickly spread to Europe, battering major markets in Germany and France. In the U.S., the selling started early and never let up. Investors ditched beaten-down oil companies, as well as Netflix, Apple and other technology darlings. Oil plunged below $40 for the first time since the financial crisis, and government bonds rallied as investors raced into hiding spots.
“Investors are wondering if growth isn’t coming from the U.S. or China, where is it going to come from?” said Tim Courtney, CIO of Exencial Wealth Advisors. “This is about growth.”
By the time it was over, the Standard & Poor’s 500 index had lost 5.8 per cent for the week, its worst weekly slump since 2011. That leaves the main benchmark for U.S. investments 7.7 per cent below its all-time high — within shooting range of what traders call a “correction,” a 10 per cent drop from a peak.
Markets began falling last week after China announced a surprise devaluation of its currency, the yuan. Investors have interpreted China’s move as a sign that flagging growth in world’s second-largest economy could be worse than government reports suggest. On Friday, they got more bad news: A private survey showed another drop in manufacturing on the mainland.
The Standard & Poor’s 500 index dropped 64.84 points, or 3.2 per cent, to close at 1,970.89.
The Dow Jones industrial average fell 530.94 points, or 3.1 per cent, to 16,459.75. That’s 10 per cent off its high, a correction.
The Nasdaq slid 171.45 points, or 3.5 per cent, to 4,706.04.
“Concerns about slowing growth in China are certainly valid,” said Jeremy Zirin, head of investment strategy at UBS Wealth Management. “But there doesn’t seem to be any signal that the weakness abroad is slipping into the U.S. economy.”
Investors pointed to other reasons behind the recent sell-off, such as falling prices for oil and other commodities.
Major markets in Europe finished with deep losses on Friday. France’s CAC-40 fell 3.2 per cent while Germany’s DAX lost 2.9 per cent. In Britain, the FTSE 100 index dropped 2.8 per cent.
In Asia, the Shanghai Composite index suffered another steep drop of 4.3 per cent. Japan’s Nikkei 225 lost three per cent, South Korea’s Kospi shed two per cent and Hong Kong ’s Hang Seng fell 1.5 per cent.