Critical Observer

<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgNaFasjXEoKNwGjKORuml9F1hN-fnmGkjZkGE6vUaY5xUFMLkrcpthriGTHE84E5I7ofw3Ozvqg3ULJ7BsVUVl7Cq4Npo6yIxFwjS5oxaA0R4wPoK3GQpDfiJXd6Qf1uWNqnojOY7Gaq8/s1600/120514dhs.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="358" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgNaFasjXEoKNwGjKORuml9F1hN-fnmGkjZkGE6vUaY5xUFMLkrcpthriGTHE84E5I7ofw3Ozvqg3ULJ7BsVUVl7Cq4Npo6yIxFwjS5oxaA0R4wPoK3GQpDfiJXd6Qf1uWNqnojOY7Gaq8/s640/120514dhs.jpg" width="640" /></a></div>
 
NEW YORK — The Dow plunged as much as 1,000 points at the open on Monday — but it rebounded a bit and closed 588.47 points down at 4 p.m, representing the worst one-day loss since August 2011. 
 
After recovering from those initial scary losses, the final drop was 3.58 percent. 
 
Global fears about China’s economic slowdown are shaking stock markets around the world for a second week in a row. The wave of selling knocked the S&P 500 into correction mode for the first time since 2011. 
 
Within minutes, the Dow plummeted as much as 1,089 points. That is the largest point loss ever during a trading day, surpassing the Flash Crash of 2010. 
 
“We have not seen this level of full-blown panic in markets for quite some time,” said Peter Kenny, chief market strategist at Clear Pool Group, a financial technology firm. 
 
However, Monday was not that bad compared to “Black Monday” in 1987. Yes, there’s a lot of panic, but the Dow tumbled a whopping 22.6 percent on October 19, 1987. On Monday, the Dow was only down about 6.6 percent at its worst point. If this were a true “Black Monday” like what happened in 1987, the Dow would have fallen 3,700 points. 
 
While we are into correction territory, it’s not unexpected. At the moment, the Dow, S&P 500 and Nasdaq indexes — America’s “Big 3” — are all in correction mode. They peaked in the spring and have lost over 10 percent since then, meaning a correction. However, a lot of experts say America was overdue for a correction. They are natural — kind of like needing to tap the breaks on a bike or car sometimes. 
 
It all started with Shanghai’s 8.5 percent drop 
 
The dramatic selling began overseas. China’s Shanghai Composite plummeted 8.5 percent, wiping out all of its massive gains so far this year. Not only has an apparent bubble in Chinese equities popped, but the country’s economy may be slowing much faster than feared. 
 
Last week’s big selloff gathered serious momentum after China said its manufacturing activity — a critical metric on growth — tumbled to a six-year low in July. 
 
Fears of China contagion 
 
China is the world’s second-biggest economy. Its explosive growth in the last two decades has been the engine for the global economy. Its enormous appetite for raw materials like oil, copper and iron ore fueled global growth, especially in emerging markets like Brazil that are rich in natural resources. 
 
But that story has been completely derailed by China’s economic slowdown. Just how much China slows down matters greatly to investors around the world. 
 
All U.S. stock market indexes are in correction 
 
Fears about the health of China’s economy have ratcheted up to the point that the S&P 500, made up the largest U.S. companies, is now sitting in “correction” territory — a 10 percent decline from a recent peak. 
 
Both the Dow and Nasdaq fell into correction mode on Friday, the first since 2011. 
 
But stocks are up about 200 percent since crisis 
 
It’s worth remembering that these steep losses come after a tremendous bull run for stocks. 
 
The S&P 500 has skyrocketed 220 percent since bottoming out at 666 during the Great Recession in March 2009. At its lows on Monday, it was at 1,866.86. 
 
Mohamed El-Erian, chief economic adviser at Allianz, believes longer term the correction will be a healthy thing for the market. 
 
“It will bring financial markets closer to what’s justified by fundamentals. Therefore, there will be less of a risk of a financial collapse down the road,” El-Erian told CNN. 
 
Oil continues downward march too 
 
Crude oil plunged below $39 a barrel on Monday for the first time since 2009. A global economic slowdown is eating into demand for oil at a time when supplies remain extremely elevated. 
 
Energy is still a substantial part of the U.S. economy and stock market. When oil prices slide this much, it means a lot of companies aren’t making money anymore. That hurts U.S. companies and many countries that depend heavily on profits from selling oil. 
 
10-year yield below 2 percent 
 
Another sign of fear: The 10-year Treasury yield slid below 2 percent on Monday. That’s the lowest level since April and a sign that investors are fleeing to the relative safety of American government debt. 
 
It also signals that Wall Street believes the Federal Reserve may have to delay its expected interest rate hike from September until later in the year or even 2016. 
 
Will the bull market survive? 
 
Ed Yardeni, president of Yardeni Research, believes the selloff has created an opportunity for investors “with the stomach to jump in.” 
 
“I think we’ll see the markets make a comeback. The fundamentals of the U.S. economy remain good, especially compared with everybody else,” Yardeni said. 
 
That would mean the bull market that began more than six years ago will survive. The S&P 500 would need to close below 1,708 to be classified a bear market, which is defined as a 20 percent decline from a previous high. Currently, the S&P is at 1,934. Germany, on the other hand, tumbled into a bear market on Monday. 
 
Bear market for Apple 
 
Many of America’s favorite stocks are now in “bear market” territory, including Disney, Tesla and even Apple. 
 
Apple CEO Tim Cook sought to ease investor anxiety. Cook told CNBC that Apple has experienced “strong growth” in China over the last two months. He said iPhone activations have actually “accelerated” in recent weeks and China continues to represent “unprecedented opportunity over the long term.”

Dow closes down down 588 points

NEW YORK — The Dow plunged as much as 1,000 points at the open on Monday — but it rebounded a bit and closed 588.47 points down at 4 p.m,...

Read Article »

<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhjhMJVHZIGRDVI5yf5gcZpLfxxpCLRsKuVEZXFIrTZp82eJ2_6QtkvCMH98_IzemOh1YqQ8gQsMDclr1jRg3x8KWS72XvwK56tzqSEJG5zd8rSZvP9kcpzkjTyXvzkGkMTLGfT8v6m_vU/s1600/22Israel-web-superJumbo.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="272" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhjhMJVHZIGRDVI5yf5gcZpLfxxpCLRsKuVEZXFIrTZp82eJ2_6QtkvCMH98_IzemOh1YqQ8gQsMDclr1jRg3x8KWS72XvwK56tzqSEJG5zd8rSZvP9kcpzkjTyXvzkGkMTLGfT8v6m_vU/s640/22Israel-web-superJumbo.jpg" width="640" /></a></div>
 
U.S stocks plunged Monday, with the Dow Jones Industrial Average plummeting more than 1,000 points following a global stock sell-off across European and Asian markets as fears escalated about China’s slowing economy. All three major indexes are on course for one of their worst opens since the financial crisis of 2008. 
 
The sharp U.S. stock downturn was anticipated after futures pointed to Monday mayhem. Dow futures plunged more than 800 points before the U.S. markets opened, as fears of a major Chinese economic downturn escalated across global markets. European markets extended losses in afternoon trade Monday, with the pan-European Stoxx 600 index down nearly 5 percent. Japan’s Nikkei 225 index dropped 4.6 percent to finish at its lowest closing level since February 23. China’s benchmark Shanghai Composite recorded its biggest one-day percentage loss since 2007, closing down 8.5 percent, dubbed “Black Monday” by China’s state media. 
 
The Dow Jones Industrial Average (INDEXDJX:.DJI) tumbled 1,089 points, or 6 percent, to 15,370.33. The S&P 500 index (INDEXSP:.INX) lost more than 100 points, or 5 percent, to 1,867.01. And the Nasdaq composite (INDEXNASDAQ:.IXIC) dropped 412 points, or nearly 9 percent, to 4,292.14. 
 
The stock rout began with China's posting of numbers that showed factory production in the world’s second-largest economy shrank in August at its fastest rate in more than six years. The numbers fuel concerns that China’s sudden slowing will have far-reaching effects around the world. 
 
All 10 sectors in the S&P 500 traded lower, led by a more than 6 percent decline in consumer staples and technology stocks. Healthcare and consumer discretionary stocks dropped more than 5 percent. 
 
Meanwhile, all 30 stocks in the Dow traded sharply lower, led by a 5 percent decline from The Coca-Cola Co. (NYSE:KO), while Cisco Systems Inc. (NASDAQ:CSCO) and McDonald's Corporation(NYSE:MCD) lost more than 4 percent. 
 
The yield on the U.S. 10-year Treasury slid further Monday to 1.97 percent from 2.045 percent Friday amid growing uncertainty about global economic growth. When investor confidence is low, the price on the 10-year goes up as there is more demand for Treasurys as a safe investment, and yields subsequently fall. 
 
The U.S. dollar fell against major currencies amid growing uncertainty of whether the U.S. Federal Reserve may wait even longer than planned after September to raise interest rates. 
 
U.S. oil prices extended losses Monday, tumbling 4 percent to trade below $30 after tallying an eighth straight weekly decline last week, the longest weekly losing streak in nearly 30 years. U.S. crude oil has lost around 17 percent from its opening price at the start of the month. 
 
West Texas Intermediate crude, the benchmark for U.S. oil prices, fell 4 percent to $38.69 per barrel for October delivery on the New York Mercantile Exchange. On the London ICE Futures Exchange, Brent crude, the global benchmark for oil prices, dropped nearly 3.5 percent to $43.87. 
 
From: International Business Times