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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Why Investors Prefer Real Estate to Stocks, Bond and Gold
Americans still feel skittish about the stock market. When it comes to long-term investments, real estate is still preferred over cash or the stock market, Bankrate.com reports in a new study. For long term investments over 10 years or more, 27 percent chose real estate, 23 percent preferred cash investments, and 17 percent opted for the stock market. Gold and precious metals came in fourth at 14 percent, and bonds debuted at 5 percent.
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Although the S&P 500 has risen 27 percent over the past two years, Americans were only slightly more inclined to favor stocks in 2015 than they were in 2013.
The only exception to the brick and mortar policy? Households headed by college graduates were the most likely to prefer stocks. In the western U.S., real estate was preferred nearly two to one over any other investment choice.
The survey of 1,000 adults living in the continental U.S. yielded some surprises across gender, age, income, location, and political party. Men were more likely to favor real estate, while women were more likely to favor cash investments.
At 32 percent, the majority of millennials--those between 18 and 29 years old--favored cold, hard cash, while 32 percent of participants between the ages of 30 and 40 stuck with real estate.
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Lower-income workers with salaries of less than $50,000 felt “more secure” than their higher earning counterparts, who were making $50,000 to $74,900. And Republicans were three times more likely to say they felt “less secure” about their jobs as Democrats.
Bankrate’s Financial Security Index for July remained positive for the 14th consecutive month. However the July reading was the second lowest in 2015, due in part to a decline in job security with 22 percent feeling “more secure” about their jobs than 12 months ago and 14 percent feeling “less secure.” Sixty-two percent felt “about the same.”
Thync Before You Act – A New Wearable Device Made for 'The Donald'
If you thought people looked foolish wearing Google Glass, wait until you see one of your coworkers sticking a white piece of plastic on her forehead, hooked around her ear. I learned about Thync, a $300 electric gizmo, reading Geoffrey Fowler’s Wall Street Journal column Tuesday.
Fowler tested it, so I don’t have to, but I just know I’ll be seeing this piece of wearable tech around town among the gadgerati I sometimes hang out with. Thync’s unique selling proposition is vibes, uncommonly known as transdermal electrical neuromodulation. Translation—it’s a low-grade form of shock therapy. The company says they’ve tested the device over years of research with their neuroscientists and engineers to give us Calm vibes or Energy vibes.
You’ll have to go to Fowler’s story to view a graphic of how this dildo for the brain actually functions, but Folwer describes the Energy vibe this way: “The sensation is like drinking an espresso, accompanied by a tingle of prickly heat behind the ear.” He compares the hour-long Calm vibe to having a glass of wine.
Like everything else related to wearable tech and the Internet of Things, the company is well funded by Silicon Valley venture capital firms, which are apparently looking for the next Fitbit. And why not? Brain fitness. I know a few people who could benefit from Thync if it works as promised.
Let’s start by getting the company to give one to Donald Trump, set it permanently on the Calm setting, and turn up the juice.
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Why You Should Shop Around for Car Insurance Right Now
If you haven’t shopped for auto insurance recently, you might want to spend an hour or so checking out other deals. It pays to review your policy and check what’s out there.
A new survey from insuranceQuotes.com shows that 66 percent of policyholders never or only rarely check to see if they could get the same or better coverage at a better price. The average American driver has been with the same auto insurance company for 12 years, and some have stayed with the same insurer for two to three decades, or longer.
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Millennials age 18 to 29 and senior citizens number among those least likely to shop around for auto insurance. At least six in 10 millennials with auto insurance assume you have to wait until your renewal date to switch insurance companies. And they’re not alone: 46 percent of Americans do not know that you can switch your auto insurance company at any time.
One of the reasons auto insurance may not be a priority for consumers? Auto pay options, while convenient, could be keeping car insurance payments and rates out of sight—and out of mind. Human nature and procrastination is another. “People think that it’s a task that might be difficult and time-consuming,” says senior analyst Laura Adams, “but it could be as simple as going to a website like insurancequotes.com, putting your information in for a free quote, and getting multiple quotes back. There’s no financial risk in looking for a new rate.”
Just spending an hour once a year to compare quotes from three different companies could potentially save you hundreds or thousands of dollars.
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Experts suggest checking your car insurance rates the same way you would remember to change the oil in your car or swap the air filters in your home. Here are some tips to get started:
- Ask your current insurer if there are any company discounts you might be eligible for but don’t know about, such as the good-student discount. For college and grad students who have a B-average or better (or their parents) that could result in a significant discount.
- If you find a better deal, tell your current insurance company that you’re thinking of switching unless they can match the new offer or exceed it.
- If your current insurer refuses to negotiate, sign up for the new policy first—and then cancel the old one. “You always want to make sure you’re covered,” says Evans. “Insurance companies do not like to see a gap in coverage, and your rates could rise.”
- To get a wider variety of quotes, get online quotes from insurance company websites, consult with an independent agent, and look into companies that don’t use independent agents as well.
“Being married can cause your rate to decrease,” says Evan. “Marriage, getting good grades--these are all things that you have to self-report, which is why I recommend revisiting auto insurance at least once a year, as your life situation could change.”
Feeling Flush, More Parents Open Their Wallets for College Spending
As lingering financial fears from the recession fade, more parents are willing and able to open their wallets to pay for their children’s educations.
Parents have become the top source of college funding for the first time since 2010. According to a new report from private student loan lender Sallie Mae’s, parental income and savings covered 32 percent of college costs in the academic year 2014-15, while scholarships and grants covered 30 percent.
Families spent an average of $24,164 on college this year, a 16 percent rise in spending from the previous year and the largest increase since 2009-10. The money spent covers costs of tuition, books, and living expenses.
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The report details how fewer parents fear the worst when it comes to the risks associated with college. Fewer parents are worried that their child won’t find a job after graduation, that their income will decline because of layoffs, and that there will be an increase in student loan rates. As confidence has increased, fewer families are using cost-saving techniques, such as having students live at home.
Another factor contributing to the willingness of parents to spend on education is the improving stock market. The average size of a 529 account, the popular college savings investment plan, continues to grow after the recession caused a downturn, hitting a balance of $20,474 as of December 1, 2014. That figure tumbled to $10,690 at the end of 2008, according to data from the College Savings Plan Network.
Although parents may be feeling better about paying for college, the basic trend of increasing prices continues, and loans are still a big part of the funding picture. Between 2001 and 2012, average undergraduate tuition almost doubled, causing an average real rate increase of 3.5 percent each year. Nearly 71 percent of college graduates left school with student loan debt this year, up from 54 percent 20 years prior. The average debt was $35,000 in 2015, an increase of 34 percent from 2010, student loan-tracker Edvisors has found.
After Hanging Back, Cameron Vows to Escalate Air Strikes Against ISIS
After losing a crucial 2013 parliamentary vote authorizing military force in Syria, Prime Minister David Cameron noticeably pulled Great Britain back from global affairs, effectively allowing other countries to address Russia’s invasion of Ukraine and the alarming growth in strength of ISIS.
Last January, President Obama reportedly told Cameron that Britain must adhere to its military spending commitment to NATO or set a damaging example to its European allies. Obama and other U.S. military officials have said that Britain’s failure to hit a military spending target of two percent of its Gross Domestic Product would be a serious blow to the military alliance.
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In an about-face, Cameron on Sunday said he hopes to step up his country’s role in the allied air campaign against ISIS while also adopting new tough measures at home to try to stem the rise of jihadist activities.
In an interview with NBC’s Meet the Press, Cameron said talks were underway in Parliament about what more can be done to allow his country to take part in the U.S. led campaign against ISIS in Syria, as well as in Iraq.
Cameron’s Conservative Party won a surprisingly resounding reelection victory in May, and since then he has been talking about the need for Britain to step up to the plate more in helping the U.S. and other allies halt the spread of ISIS throughout the Middle East and North Africa. Although Parliament in 2013 rejected air strikes against ISIS in Syria, media reports last week revealed that British pilots embedded with coalition forces have been taking part in operations in Syria.
"In Syria we're helping not just with logistics, but surveillance and air-to-air refueling,” Cameron confirmed yesterday. “But we know we have to defeat ISIS, we have to destroy this caliphate whether it is in Iraq or in Syria--that is a key part of defeating this terrorist scourge that we face. I want Britain to do more. I'll always have to take my parliament with me," said Cameron.
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Cameron was expected to announce a five-year plan for fighting the terrorist group on Monday, according to The Sunday Times.
"I want to work very closely with President Obama, with other allies,” Cameron said. “Britain is now committed to its NATO two per cent defense spending target all the way through this decade. We've already carried out more air strikes in Iraq than anyone else other than the U.S., but I want us to step up and do more, what I call a full spectrum response,” he said on Meet the Press.”
Until recently, Cameron has sought to steer his country on a centrist path that included tough austerity measures and a dramatic scaling back of the United Kingdom’s military presence overseas. Those policies were only reinforced by Cameron’s strong showing at the polls.
Since the Great Recession, the British Army lost fully 20 percent of its troops--from 102,000 to 82,000 since 2010.
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British aircraft and unmanned drones have been used to attack ISIS emplacements in Iraq with more than 200 bombs and missiles, according to a recent report by The Guardian. ISIS targets included 20 buildings, at least two containers and 65 trucks. As the Guardian noted, British air operations are a small fraction of those carried out by U.S. aircraft and drones, which have struck more than 6,000 targets as part of Operation Inherent Resolve, according to recent Pentagon figures.