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.
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"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.
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Americans Just Went on a $32 Billion Credit Card Shopping Spree
Americans may be heading for another credit card crunch. After paying down almost $35 billion in credit card debt in the first quarter of the year, consumer charged up a storm in the second quarter, racking up $32.1 billion in new debt, according to CardHub, a credit card comparison site. CardHub says that’s the second highest quarterly total since it began keeping data on credit card debt in 2009.
While that buying binge could potentially signal improved confidence in the economy and in their own financial prospects, CardHub warns that the debt risks are building. It projects that consumers will close out the year with an annual net increase of more than $60 billion in credit card debt, with the total credit card debt outstanding climbing to more than $900 billion, the highest since the recession.
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CardHub CEO Odysseas Papadimitriou says that jump brings Americans “perilously close to a tipping point at which balances become unsustainable and delinquency rates skyrocket.”
For 7 out of the past 10 quarters, consumers have racked up more debt than they’ve paid off. Papadimitriou cites that as evidence that consumers are going back to the bad habits they had before the economic downturn.
CardHub based its study on data from the Federal Reserve, and if the results are a sign of trouble then another new report from the Federal Reserve Bank of New York suggests that problem is even worse than it looks. In a report called “Do We Know What We Owe,” the New York Fed found that people widely underestimate their credit card debt, telling the Fed’s survey-takers that it’s about 37 percent lower than what lenders say it is.
So if we are actually getting to a tipping point with credit card debt, it may be even closer than we realize.
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Watch Jeb Bush Do His Best Donald Trump Impression with Stephen Colbert
Unless you've been in your own personal media blackout for the last few days, you're probably aware that Stephen Colbert kicked off his new show Tuesday night and that Jeb Bush was one of his first guests. While the maiden voyage of the new “Late Show” has drawn mixed reviews -- “promising, if he relaxes” says USA Today, referring to the host – the show provided plenty of entertaining bits and compelling if somewhat odd moments.
Like much of the show, Colbert’s conversation with Bush was a mixed bag. Both host and guest seemed a bit nervous and some of their lines fell flat. Surprisingly, one of the more entertaining parts of their conversation never made it on air: Colbert had Bush read some text written in the bombastic voice of Donald Trump. Bush was game for the joke, and the results are worth a look.
The fun at Trump's expense starts at the 2:32 mark, when Stephen Colbert refers to the "big, orange elephant in the room."
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Here’s Why Home Prices Are Climbing So Quickly
Want to buy a home but finding slim pickings? Blame the builders.
New home construction has not kept pace with the improving job market in recent years and is part of the reason that housing inventory is so scarce and home prices are growing so quickly, according to a report released today by the National Association of Realtors.
After over-building leading up to the housing bubble, developer laid off workers and scaled back construction by more than 75 percent. After the crash many of those workers migrated to other industries, making it harder for builders to quickly ramp up work. There are also fewer builders now than there were a decade ago, with many going bust in the bubble and others consolidating with competitors.
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While home starts have come back since the recession, the new NAR report finds that in two-thirds of markets homebuilding activity has not kept pace with the number of newly employed workers. In particular, construction of single-family homes remains at less than half its prerecession levels.
Many of the markets with the largest disparity of jobs versus home construction were hit hardest by the housing crisis but have fully rebounded, including San Jose, San Francisco, San Diego and Miami. New York is also among the top cities where home building has not kept pace.
There are several reasons that new home construction has grown so slowly in recent years, including rising construction and labor costs and tight credit. Despite those headwinds, new home construction is expected to grow by more than 25 percent this year.
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Millennials to Employers: Show Us the Money
When it comes to company loyalty, money matters to millennials. Twenty-nine percent of millennials say that a higher salary is the biggest contributor to their loyalty, according to data released Tuesday by the Staples Advantage Workplace Index.
That compares to 20 percent of the overall workforce who place a priority on salary. The difference could be related to the fact that millennials tend to make lower wages than other workers and face higher fixed costs on things like student loans and rent.
Still, the job market is tightening, making it easier for millennials who feel they are underpaid to look elsewhere for work. The unemployment rate for millennials has fallen by nearly 40 percent since its peak in 2010.
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Millennials are willing to work long hours but they want to be able to do so on their own terms. More than half of younger workers said that they work from home after the work day is over, compared to 39 percent of the all workers. Nearly half of millennials said that increased flexibility would improve their happiness.
Other important factors for millennials are office perks such as a gym or free lunches, having an eco-friendly office and a company culture that encourages breaks.
Whether or not they’re happy with their current roles, millennials are looking toward the future with ambition. Seventy percent of those surveyed said they expect to be in a management position in the next five years.
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Gas Prices at an 11-Year Low for Labor Day Weekend
Drivers will be paying less at the pump as we head into one of the largest travel weekends of the year. Gas prices over Labor Day weekend haven’t been this low since 2004.
The national average price of gas is currently $2.44 per gallon, 99 cents less than this time last year, according to AAA. The average consumer can expect to save $15 to $25 on each trip to the gas station.
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AAA estimates that 35.5 million people are planning to travel this weekend, a 1 percent increase from last year. The majority of travelers, 30.4 million, are expected to drive to their destinations, a rise of 1.1 percent from last year.
Gasoline prices are moving lower thanks to the falling price of crude oil. Oil has been hit by worries over economic growth in emerging markets, Iranian oil flooding the market and crude oil inventories rising due to economic and weather factors, a U.S. Energy Information Administration report finds.
For drivers, there’s more good news ahead. AAA expects gas prices to keep falling, with gas selling for $2 or less a gallon by Christmas in many parts of the U.S.
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