After a midday recovery, U.S. stock markets dove once again. At close, the Dow Jones Industrial Average had lost nearly 600 points, and the S&P 500 and the NASDAQ lost roughly 4 percent. This follows a rough day of trading on Friday, during which the Dow lost 531 points.
Stock markets had plummeted at opening this morning, with the Dow Jones Industrial Average falling more than 1,000 points, or 5 percent.
The market had rebounded and made back most of its gains by noon, but the recovery didn’t last long as the volatile trading continued.
Today’s upheaval comes after stocks nosedived in China Monday. By close, the Shanghai Composite Index lost 8.5 percent, erasing the gains they had made in the past year.
Global markets have been on a roller coaster ride since China abruptly devalued the yuan two weeks ago, spurring anxiety about the state of China’s economy. And in June, China’s stock market crashed, and People’s Bank of China stepped in in an attempt to reign in selling. Since then, the Shanghai Composite Index has lost nearly 40 percent.
“In came the fear that the Chinese government can’t control the market as well as they thought they could,” Scheherazade Rehman, professor of international finance at George Washington University, explained. That uncertainty crept into the market, and the U.S.’s talk of raising interest rates didn’t help.
On Thursday and Friday, this fear hadn’t gone away, and investors continued to sell. “[The Chinese government] intervened and tried to stop the crisis, and when they could not, it just fueled the fire,” Rehman said.
Investors worldwide are worried. Not only does China’s devaluing currency spur concerns of a currency war (in which countries competing with China’s exports devalue their currencies to boost their own exports), but China had been the main driver of global economic growth since the Great Recession. China has reported that a 7 percent growth rate, but many economists wonder if it’s not much lower. And if China’s growth is slowing, global growth may be as well.
That uncertainty about China’s economy has made its way into U.S. markets as well. While investors went on a brief buying spree after the stock market dove in the morning, they began to sell again before close. “Always at the end of the close of the market, the fear creeps back in again. People are worried about what is the Chinese market going to do tomorrow morning?”