- The Washington Times
Monday, August 24, 2015

U.S. stock markets experienced one of the wildest trading day in years Monday, with the Dow Jones index losing nearly 1,100 points — nearly 6 percent of its total value — in the first few minutes after trading began, staging a spirited rally, but turning strongly negative again to finish off 588 points, or 3.58 percent.

The second straight day of losses over 500 points raised fresh concerns about the stability of markets around the world, with analysts saying investors would need some kind of positive news to turn around a decline that shows no signs yet of having hit bottom.

A classic roller-coaster day, following even bigger losses in China and in all of the major European markets, saw Wall Street rally after a disastrous opening but never managing to come close to positive territory. A midday rally, which cut the Dow’s losses below 200 points, was swamped as sellers re-entered the market in force, sending the index down more than 700 points a half-hour before the close.

The Dow and the broader S&P 500 are on pace for their worst monthly losses since the depths of the global financial crisis in early 2009. The Dow, which climbed above the 18,000 mark for the first time ever earlier this summer, finished the day at 15,871.28 — 13.4 percent below the record close of 18,312 reached just five months ago.

The plunge followed a string of sharp losses late last week, amid growing concerns about the strength of the Chinese economy, the prospect of higher U.S. interest rates and continued troubles in many of the emerging markets that had fueled a decade of stock growth. The market losses could have major policy implications as well, with the Federal Reserve weighing whether to raise interest rates and China under increasing pressure to stabilize its stock markets and stimulate its domestic economy.

White House spokesman Josh Earnest said President Obama and the Treasury Department were monitoring the markets, and insisted the fundamentals of the U.S. economy remained strong. He said the administration would continue to press China to pursue market-oriented economic and currency reforms.

SEE ALSO: After opening plunge, Dow posts second straight 500-point-plus loss

Mr. Earnest said the market turmoil was another argument to avoid “self-inflicted wounds” to the U.S. economy, calling on Congress to reauthorize the Export-Import Bank and to spend more on domestic investment programs.

Despite the sharp drop, the losses Monday were nowhere near the record on a percentage basis. The 1987 “Black Monday” crash sent the Dow down just 500 points, but that represented nearly 22 percent of the market’s total value. The S&P 500 was down 77 points, or 7.9 percent, with virtually every stock in the broader index losing ground Monday. The tech-heavy Nasdaq off just 3.82 percent.

Traders reported heavy trading volume, a reflection of pent-up fear as investors spent the weekend worried about fresh weaknesses in the global economy. Wall Street officially entered a technical “correction” on Friday — defined as a fall of at least 10 percent from its most recent peak.

The market losses and the larger “headwinds” facing China and the global economy have finally punctured the market’s “illusion of stability” that has kept the Dow at or near record levels for much of 2015, Charlie Bilello, director of research at Pension Partners, LLC, told CNBC. He predicted the markets would have difficulty fashioning another rally this time to restore stock to their previous highs.

U.S. investors woke Monday to sharp new losses on stock markets around the world. China’s Shanghai composite index fell 8.5 percent on Monday and the ripple effects were felt across the globe.

The Nikkei index in Japan lost 4.6 percent, as did the Stoxx Europe 50 index in Europe. Germany’s DAX indextand and France’s CAC-40 both were down about 5 percent.

Several analysts predicted the market downturn could force the Federal Reserve to delay once again its plan to raise U.S. interest rates, which have been at near-zero since the 2008 global downturn.

“There is a realization that the global growth is not moving as quickly as expected,” Ernie Cecilia, chief investment officer of Bryn Mawr Trust, told the Reuters news service.

• David R. Sands can be reached at dsands@washingtontimes.com.

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