Stocks plunged again in the US, continuing a rocky ride for Wall Street, after an economic report from China rekindled fears that the world’s second-largest economy is slowing more than previously anticipated.
The sell-off adds to what has been a difficult few weeks for US and international markets. US stocks have just ended their worst month in more than three years.
Tuesday’s drop also dashed hopes that, after some relatively calm trading on Friday and Monday, the stock market’s wild swings were coming to an end.
“This market remains fragile,” said Jack Ablin, chief investment officer at BMO Private Bank. “There’s nothing fundamentally wrong with the US economy, but we are going through this correction process. We’ve got a rocky road ahead of us.”
Stocks started the day sharply lower and never recovered, with the Dow Jones industrial average falling as much as 548 points. No part of the market was spared. All 10 sectors of the Standard & Poor’s 500 index fell more than 2%. Just three stocks in the S&P 500 closed higher.
In the end, the Dow lost 469.68 points, or 2.8%, to 16,058.35. The S&P 500 fell 58.33 points, or 3%, to 1,913.85 and the Nasdaq composite fell 140.40 points, 2.9%, to 4,636.10.
As it has been for the last few weeks, the selling and problems started in Asia.
An official gauge of Chinese manufacturing fell to a three-year low last month, another sign of slowing growth in the country. The manufacturing index, which surveys purchasing managers at factories, dropped to a reading of 49.7 in August from 50.0 in July. A reading below 50 indicates a contraction.
China’s stocks sank on the news, with Shanghai Composite Index closing down 1.2%. The index has lost 38% of its value since hitting a peak in June.
The Chinese economy has been a focus for investors all summer, and the concerns have intensified in the last three weeks.
China devalued its currency, the renminbi, in mid-August. Investors interpreted the move as a sign that China’s economy was not doing as well as previously reported.
Investors moved into traditional havens like bonds and gold on Tuesday. Bond prices rose, pushing the yield on the benchmark 10-year Treasury note down to 2.16% from 2.22% on Monday. Gold rose 7.30 dollars, or 0.6%, to settle at 1,139.80 dollars an ounce.
Faced with the possibility of slowing demand in China, the commodity markets once again took the brunt of the hit.
US crude oil fell 3.79 dollars to close at 45.41 dollars a barrel in New York. Brent Crude, a benchmark for international oils used by many US refineries, fell 4.59 dollars to close at 49.56 dollars in London.
Energy stocks were once again among the biggest decliners. Exxon Mobil fell nearly 4% and Chevron fell 2.5%. Exxon is down 22% this year, Chevron 30%.
In a sign of how battered energy companies have been this year, ConocoPhillips announced it was laying off 10% of its workers, roughly 1,800 workers, as a reaction this year’s plunge in oil prices.
Along with worries about China, speculation about whether or not the Federal Reserve will raise interest rates as soon as this month continues to worry on markets.
Traders say a lot hinges on the August jobs report, which will be released on Friday. Economists are forecasting that US employers created 220,000 jobs in the month and that the unemployment rate fell to 5.2%.
The Federal Reserve meets on September 16 and 17. Some economists are predicting that policymakers will be confident enough in the US economic recovery to raise interest rates for the first time in almost a decade.
While Fed officials are mostly focused on the US economy, they cannot ignore problems in the global economy.
“China’s problems are totally a concern for the Fed,” said Tom di Galoma, head of rates trading at ED&F Man Capital. “With inflation remaining low here, I just don’t a reason why they would raise rates.”
Markets in Europe were broadly lower. Germany’s DAX fell 2.4%, France’s CAC-40 lost 2.4% and the U.K.’s FTSE 100 index declined 3%. Japan’s Nikkei 225 was also volatile, dropping 3.8%. The Hang Seng in Hong Kong sank 2.2%. Stocks also fell in South Korea and Australia.