Dow Sheds Nearly 600 Points, S&P 500 in Correction in a Wild Day on Wall Street
U.S. stocks plunged more than 3.5 percent on Monday, closing off session lows in high volume trade as fears of slowing growth in China pressured global markets.
S&P 500 ended nearly 80 points lower, off session lows of about 104 points lower but still in correction territory after the tech sector failed intraday attempts to post gains. Cumulative trade volume was 13.94 billion shares, the highest volume day since Aug. 10, 2011.
The major averages had a volatile day of trade, plunging sharply in the open and more than halving losses to trade less than 1 percent lower on the day, before closing down more than 3.5 percent.
"I think we probably rallied too fast. A lot of people that covered their shorts got their shorts covered," said Peter Coleman, head trader at Convergex. He noted the Dow was still trading several hundred points off session lows and that a close better than 500 points lower would be a good sign.
Related: The Stock Market's Fed Fever Is Only Going to Get Worse
"The market's going to be focused on China tonight to see if they come on tonight with something that would be considered a viable (way) to stimulate growth in that economy," said Quincy Krosby, market strategist at Prudential Financial.
The Dow Jones industrial average ended nearly 600 points lower after trading in wide range of between roughly 300 to 700 points lower in the minutes leading up to the close.
In the open, the index fell as much as 1,089 points, making Monday's move its biggest intraday swing in history. In midday trade, the index pared losses to trade about 110 points lower.
The blue-chip index posted its biggest 3-day point loss in history of 1,477.45 points.
During the first 90 minutes of trade, the index traveled more than 3,000 points in down and up moves.
"I'm hoping for some stability here but I think markets remain very, very vulnerable to bad news (out of) emerging markets," said Dan Veru, chief investment officer at Palisade Capital Management.
He attributed some of the sharp opening losses to exchange-traded funds. "It's so easy to move a bajillion dollars in a nanosecond."
Trading in stocks and exchange-traded funds was paused more than 1,200 times on Monday, Dow Jones said, citing exchanges. Such pauses total single digits on a normal day, the report said. An increase or decline of five percent or more triggers a five-minute pause in trading, Dow Jones said.
The major averages came sharply off lows in midday trade, with the Nasdaq off as low as less than half a percent after earlier falling 8.8 percent. Apple traded more than 1.5 percent lower after reversing losses to briefly jump more than 2 percent.
"There was sort of a lack of follow-through after the morning's crazy action in the overall market," said Robert Pavlik, chief market strategist at Boston Private Wealth. "The selling really dissipated once we got to around 10 o'clock."
He attributed some of the late morning gains to a short squeeze and bargain hunting.
Art Hogan, chief market strategist at Wunderlich Securities, noted that the sharp opening losses were due to great uncertainty among traders and the implementation of a rare market rule.
The New York Stock Exchange invoked Rule 48 for the Monday stock market open, Dow Jones reported.
The rule allows NYSE to open stocks without indications. "It was set up for situations like this," Hogan said. The rule was last used in the financial crisis.
Stock index futures for several major indices fell several percentage points before the open to hit limit down levels.
Circuit breakers for the S&P 500 will halt trade when the index decreases from its previous close by the following three levels: 7 percent, 13 percent, and 20 percent.
"Fear has taken over. The market topped out last week," said Adam Sarhan, CEO of Sarhan Capital. "We saw important technical levels break last week. Huge shift in investor psychology."
"The market is not falling on actual facets of a sub-prime situation. It's falling on fear of the unload of China. That's really behind this move," said Peter Cardillo, chief market economist at Rockwell Global Capital.
The CBOE Volatility Index (VIX), considered the best gauge of fear in the market, traded near 40. Earlier in the session the index leaped above 50 for the first time since February 2009.
"When the VIX is this high it means there's some panic out there," said Randy Frederick, managing director of trading and derivatives at Charles Schwab.
However, he said with stocks more than halving losses he "wouldn't be surprised if we closed positive." "If you could move it that far you could move it another 350 points" on the Dow," he said.
Overseas, European stocks plunged, with the STOXX Europe 600 down more than 5 percent, while the Shanghai Composite dropped 8.5 percent, its greatest one-day drop since 2007.
Treasury yields came off session lows, with the U.S. 10-year yield at 2.01 percent and the 2-year yield at 0.58 percent.
The U.S. dollar fell more than 1.5 percent against major world currencies, with the euro near $1.16 and the yen stronger at 119 yen versus the greenback.
A U.S. Treasury Department spokesperson said in a statement that "We do not comment on day-to-day market developments. As always, the Treasury Department is monitoring ongoing market developments and is in regular communication with its regulatory partners and market participants."
The Dow transports ended more than 3.5 percent lower to approach bear market territory.
About 10 stocks declined for every advancer on the New York Stock Exchange, with an exchange volume of 901 million and a composite volume of 4 billion as of 2:05 p.m.
Crude oil futures settled down $2.21, or 5.46 percent, at $38.24 a barrel, the lowest since February 2009. In intraday trade, crude oil futures for October delivery fell as much as $2.70 to $37.75 a barrel, a six-and-a-half-year low.
Gold futures settled down $6.10 at $1,153.60 an ounce.
This post originally appeared on CNBC. Read More at CNBC:
- Wharton's Siegel: We're going to test, possibly break this morning's lows
- Barclays: Fed unlikely to hike before March 2016
- One of Wall St's biggest bulls throws in the towel
4.2 Million Uninsured People Could Get Free Obamacare Plans
About 4.2 million uninsured people could sign up for a bronze-level Obamacare health plan and pay nothing for it after tax credits are applied, the Kaiser Family Foundation said Tuesday. That means that 27 percent of the country’s 15.9 million uninsured people could get covered for free. The chart below breaks down the eligible population by state.
Takedown of the Day: Ezra Klein on Paul Ryan's Legacy of Debt
Vox’s Ezra Klein says that retiring House Speaker Paul Ryan’s legacy can be summed up in one number: $343 billion. “That’s the increase between the deficit for fiscal year 2015 and fiscal year 2018— that is, the difference between the fiscal year before Ryan became speaker of the House and the fiscal year in which he retired.”
Klein writes that Ryan’s choices while in office — especially the 2017 tax cuts and the $1.3 trillion spending bill he helped pass and the expansion of the earned income tax credit he talked up but never acted on — should be what define his legacy:
“[N]ow, as Ryan prepares to leave Congress, it is clear that his critics were correct and a credulous Washington press corps — including me — that took him at his word was wrong. In the trillions of long-term debt he racked up as speaker, in the anti-poverty proposals he promised but never passed, and in the many lies he told to sell unpopular policies, Ryan proved as much a practitioner of post-truth politics as Donald Trump. …
“Ultimately, Ryan put himself forward as a test of a simple, but important, proposition: Is fiscal responsibility something Republicans believe in or something they simply weaponize against Democrats to win back power so they can pass tax cuts and defense spending? Over the past three years, he provided a clear answer. That is his legacy, and it will haunt his successors.”
Number of the Day: $300 Million
Mick Mulvaney, the acting director of the Consumer Financial Protection Bureau, wants the agency to be known as the Bureau of Consumer Financial Protection, the name under which it was established by Title X of the 2010 Dodd-Frank Wall Street reform law. Mulvaney even had new signage put up in the lobby of the bureau. But the rebranding could cost the banks and other financial businesses regulated by the bureau more than $300 million, according to an internal agency analysis reported by The Hill’s Sylvan Lane. The costs would arise from having to update internal databases, regulatory filings and disclosure forms with the new name. The rebranding would cost the agency itself between $9 million and $19 million, the analysis estimated. Lane adds that it’s not clear whether Kathy Kraninger, President Trump’s nominee to serve as the bureau’s full-time director, would follow through on Mulvaney’s name change once she is confirmed by the Senate.
Why Trump's Tariffs Are Just a Drop in the Bucket
President Trump said this week that tariff increases by his administration are producing "billions of dollars" in revenues, thereby improving the country’s fiscal situation. But CNBC’s John Schoen points out that while tariff revenues are indeed higher by several billion dollars this year, the total revenue is a drop in the bucket compared to the sheer size of government outlays and receipts – and the growing annual deficit.
Bank Profits Hit New Record Thanks to 2017 Tax Law
Bank profits reached a record $62 billion in the third quarter, up $14 billion, or 29.3 percent, from the same period last year, according to data from the Federal Deposit Insurance Corporation. The FDIC said that about half of the increase in net income was attributable to last year’s tax cuts. The FDIC estimated that, with the effective tax rates from before the new law, bank profits for the quarter would have risen by about 14 percent, to $54.6 billion.
