Global economic-growth fears slammed Wall Street on Monday as U.S. equity markets plunged.
As of 9:50 a.m., the Dow Jones Industrial Average plunged 611 points, or 3.72% to 15853. The S&P 500 declined 73 points, or 3.74% to 1897, while the Nasdaq tumbled 197 points, or 4.22% to 4503.
The Dow saw its biggest-ever intraday point drop on Monday at the opening bell as it plunged 1,089 points. At the start of trading, all three major U.S. averages fell deep into correction territory.
A weekend to digest growing global economic-growth concerns failed to settle nerves on Wall Street as U.S. equities took a nosedive one session after the Dow officially entered a correction. Wall Street extended a selloff in global equity markets as worries about significant deterioration in China sparked fear in the minds of investors around the world.
The concern comes as traders wonder what the next shoe to drop is from Chinese officials to stem the bleeding. The world’s second-largest economy moved two weeks ago to devalue its currency, the yuan, on the heels of continued weakness in its economic data.
“Regardless of what the Chinese government and PBoC might be saying and doing, they are currently learning a lesson that many have learned before them, namely you can only fight against market forces for so long before you end up losing,” Alastair McCaig, IG market analyst, said in a note Monday morning.
China’s Shanghai Composite Index plummeted more than 9% during the session Monday, and closed down 8.5% pushing equity markets in Asia to give up their 2015 gains. Hong Kong’s Hang Seng tumbled 5.17%, while Japan’s Nikkei dropped 4.61%.
As the carnage spread, European equity markets didn’t fare much better. The Euro Stoxx 50, which tracks large-cap companies in the eurozone, declined 4.43%, plunging further into correction territory after notching its worst week in four years last week. The German Dax shed 3.89%, while the French CAC 40 sank 4.63%, and the UK’s FTSE 100 dropped 4.15%.
Peter Kenny, chief market strategist at Clearpool Group, called the action in global markets dramatic and gut wrenching, and said before the close of trade in the U.S., investors could witness all major averages in correction territory.
“The speed at which the market has moved sharply lower is an indication panic is driving all investment decisions,” he said.
McCaig pointed out that August is typically known as a quiet month for action in the equity markets as investors seek relaxation amid summer’s last days. However, this year is an exception to the rule.
“The volatility index has now doubled in less than three trading days and this is a clear example that panic rather than prudence is driving trader’s thinking,” he wrote. “How long equity markets remain this negative should help clear up how much of the downward move is due to sellers dumping shares, or whether it’s down to a short-term absence of buyers.
Commodity markets couldn’t escape the bloodletting as crude prices sank to fresh six-year lows. U.S. crude dropped 3.46% to $39.04, while Brent, the international benchmark declined 3.65% to $43.80 a barrel.
“Oil prices have continued falling and even though they’ve been sitting in oversold territory for more than a week, the increasing doubts over China’s abilities to meet its 7% growth target is looking more and more unachievable,” McCaig said.
Gold dipped 0.20% to $1,157 a troy ounce as it tried to hang on to a seven-week high, while silver dropped 2.50% to $14.96. Meanwhile, aluminum and copper hit their lowest levels since 2009.
In a flight to safety, traders snapped up 10-year U.S. Treasury bonds. The yield fell 0.090 percentage point to 1.960%, the lowest level since April.
In currencies, meanwhile, the euro jumped 0.89% against the U.S. dollar, while the greenback gained 0.24% against the Chinese yuan.
Follow Victoria Craig on Twitter @VictoriaCraig.