TIME China

China Cracks Down on Top Brokerage Firm Over Suspicions of Short Selling

A woman walks past a signboard of CITIC Securities at its head office in Beijing
Kim Kyung Hoon—Reuters A woman walks past a signboard of CITIC Securities at its head office in Beijing March 27, 2013.

A journalist and two officials from the country's securities regulatory body are also being questioned

China continued its probe this week into recent irregularities in the stock market, naming two more executives of the country’s top brokerage firm CITIC Securities in an investigation into market manipulation and insider trading.

A total of eight employees from CITIC were taken in for questioning by Chinese police on Tuesday along with two officials of the China Securities Regulatory Commission and a reporter for prominent business magazine Caixin accused of spreading false information, the South China Morning Post reported.

The detained brokers, suspected of “malicious short selling” that led to the Chinese stock market’s recent volatility, include CITIC’s managing director Xu Gang and two members of the investment bank’s executive committee named Ge Xiaobo and Liu Wei. They are also suspected of forging government documents.

“The severity of the problem and the depth of the investigations turned out to beat many people’s expectations,” a source connected to CITIC told the SCMP. “It is a sign more influential securities-industry officials will be uncovered as the authorities deepen investigations.”

[SCMP]

TIME stock market

U.S. Stocks End the Day Lower After Dropping Sharply Near Close

New York Stock Exchange
Brendan McDermid—Reuters A screen displays the Dow Jones Industrial Average as a trader passes by on the floor after the closing bell at the New York Stock Exchange on Aug. 25, 2015.

The Dow Jones fell another 200 points as the day's early recovery faltered

Just when it looked as if the bleeding had stopped, it started up again.

A rally in U.S. stocks evaporated in the minutes before the closing bell Tuesday, sending the Dow Jones industrial average down more than 200 points and extending Wall Street’s losing streak to six days — the longest such stretch in more than three years.

Where the market might bottom out is anyone’s guess — not exactly comforting news to anyone whose retirement savings or down payment on a house are tied up in stocks.

The rally came after China lowered interest rates to try to boost its slowing economy. Other world markets surged on the news out of Beijing, and for a while, it looked as if U.S. stocks would follow suit and the global sell-off might stop.

Stocks also got a lift from economic reports showing a rebound in U.S. consumer confidence and sales of new American homes.

At one point Tuesday, the Dow was up as much as 441 points. But sell orders began pouring in in the last 15 minutes of trading, and stocks swung abruptly from positive to negative territory.

The Dow ended with a loss of 204.91 points, or 1.3 percent, at 15,666.44. The Standard & Poor’s 500 index fell 25.60 points, or 1.4 percent, to 1,867.61. The Nasdaq composite declined 19.76 points, or 0.4 percent, to 4,506.49.

“The return to a more traditional stimulus from China helped excite many investors,” said Jeff Kleintop, chief global investment strategist at Charles Schwab. “But, in fact, this is more likely the start of a longer-term period of volatility.”

The three major U.S. indexes have now lost ground six days in a row, with the Dow falling about 1,900 points over that period.

The S&P 500 is down 12 percent from its record close of 2,130.82 on May 21. That puts it in what Wall Street calls a “correction” — a drop of at least 10 percent from its most recent high. It is the S&P’s first correction in nearly four years.

The last time the S&P declined six days straight was July 2012.

China, the world’s second-largest economy, cut its interest rates for the fifth time in nine months in a renewed effort to shore up growth. The central bank also increased the amount of money available for lending by reducing the reserves banks are required to hold.

A slowdown in China has the potential to significantly crimp demand for oil and other commodities, a ripple effect that could dampen global economic growth.

“The Chinese economy is going to be on this bumpy road for a while, and it will have ebbs and flows that will no doubt have a serious impact on the global economy,” said Kamel Mellahi, professor at the Warwick Business School. “What we are seeing now is a dress rehearsal of things to come.”

Beyond China, traders are waiting for clarity from the Federal Reserve, which has signaled it could begin raising its key interest rate from near zero for the first time in nearly a decade as early as this year. The Fed isn’t expected to deliver a policy update until it wraps up a meeting of policymakers in mid-September.

European markets recovered almost all their losses from Monday’s sell-off. Germany’s DAX jumped 5 percent, while France’s CAC-40 rose 4.1 percent. The FTSE 100 index of leading British shares gained 3.1 percent.

China’s central bank took action hours after the country’s main stock index closed sharply lower for a fourth day. The Shanghai stock index slumped 7.6 percent, on top of Monday’s 8.5 percent loss.

Tokyo’s Nikkei 225 also closed lower, sliding 4 percent. But other markets in Asia posted modest recoveries, including Hong Kong and Sydney.

Energy company Pepco Holdings declined the most in the S&P 500 on Tuesday after regulators in Washington rejected its proposed merger with Exelon. Pepco stock shed $4.44, or 16.5 percent, to $22.51.

Best Buy recorded the biggest gain in the index, climbing $3.68, or 12.6 percent, to $32.95, after the home electronics chain reported better-than-expected results for the quarter.

Oil rebounded from its lowest closing level in more than six years. The price of U.S. crude rose $1.07, or 2.8 percent, to $39.31.

U.S. government bond prices fell, pushing up the yield on the 10-year Treasury note to 2.07 percent.

___

AP Business Writer Joe McDonald in Beijing contributed to this story.

MONEY stocks

Stock Market Slide Is Unlikely to Signal a Bear Market

Asian Markets Continue To Fall on Fears Of China Slowdown
Chris McGrath—Getty Images A man looks at a screen showing global stock market information on the street in Tokyo on August 25, 2015. Japan's share prices dropped nearly 4.0 percent, closing at 17,806.70 following a 4.6% plunge on "Black Monday" to the lowest level seen since late February.

The U.S. economy remains strong despite the market chaos.

Wall Street’s selloff on Monday, sparked by a near-9% dive in Chinese shares, was a long-overdue correction that analysts said is unlikely to undermine support for U.S. stocks going forward.

“We are unlikely to be going into a bear market,” said Jason Ware, chief investment officer at Albion Financial Group, which manages about $1 billion for clients from Salt Lake City, Utah.

“There are a number of positive things happening under the surface of all this chaos and it is easy to forget those things when you see these types of moves,” he added.

After dropping more than 1,000 points, or almost 7%, at Wall Street’s open, the Dow Jones industrial average cut its losses but still finished down 3.6%. The Standard & Poor’s 500 index closed down 3.9% for the day and was 11% lower than its May record high.

An index is considered to be in correction when it closes 10% below its 52-week high. The Dow was confirmed to be in a correction on Friday.

The S&P index has accumulated 9.95% of losses in just five sessions, a correction analysts had been arguing was long overdue and a missing link of a healthy market.

The benchmark index had not had a by-the-book correction in about four years, but there were early signs that markets may begin to stabilize as U.S. stock index futures all rose at the start of the Tuesday session.

Ware and others pinned the early losses on what he called “indiscriminate selling” – automatic trading, forced selling to meet margin calls and the like.

Among the positives he and others cited, the U.S. economy has been seen on strong enough footing to warrant a Federal Reserve interest rate increase, with many expecting one before the end of the year.

While turmoil in world financial markets could undermine Fed expectations that U.S. inflation will start to rise and push back market bets on a rate hike, the U.S. economy remains strong.

The S&P 500 earnings outlook improved as well: Second-quarter expectations now are for a 1.3% increase, sharply above the 3% decline expected at the start of last month.

“Over the course of the next couple of weeks we are going to get a number of data points that reinforce the U.S. economy is frankly in pretty good shape,” said Phil Orlando, chief equity market strategist at Federated Investors in New York.

Coast Not Clear Yet

Buying market pullbacks has been a winning trade for years now, but Monday’s head fake of a rebound may have made a dent on the “buy the dip” mentality.

“I think this time around it may take a little while,” said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis.

“It may attract a lot of ‘buy the dippers’ but then it failed for a second time. I don’t think you got people focused on fundamentals, there’s little focus beyond emotion and technical trading areas.”

For some, the move at the open had all the hallmarks of a forced liquidation of positions that hedge funds and other big investors had financed with borrowed money.

“There is no reason we should have been able to buy Facebook down at $73 or Apple down at $92. People had margin calls and were getting hit out at whatever prices they could get,” said Steven Spencer, partner at proprietary trading firm SMB Capital in New York. “We were buying a lot of blue chip names, down 5 to 10%.”

Apple closed the day down 2.5% after falling as much as 13%.

As dramatic as the rebound was, however, few would dare say the market has set a bottom. The Fed has been hinting for months at a rate hike, which would be the first in almost a decade and could spook investors into more stock selling.

China’s slowdown could be confirmed by more softening data, which likely would trigger further declines on Wall Street.

“The fundamental reasons why one owns stocks are unbroken. The (U.S.) economy and earnings are holding up,” said Albion’s Ware.

“That said it’s the uncertainty that drives everyone crazy; because no one really knows.”

–Additional reporting by Chuck Mikolajczak, Saqib Ahmed and David Randall

TIME Markets

World Markets Recover as China Cuts Interest Rates

An investor looks at an electronic board showing stock information at a brokerage house in Shanghai
Aly Song—Reuters An investor looks at an electronic board showing stock information at a brokerage house in Shanghai, on Aug. 25, 2015.

China's main stock-market index fell for a fourth day before government action

BEIJING — Global markets rebounded Tuesday after China’s central bank cut its key interest rate to support growth in the world’s second-largest economy. Earlier, China’s main stock index closed sharply lower for a fourth day.

European markets recovered almost all their losses from Monday, with most rising at least 4 percent, while U.S. stocks were expected to open higher and oil prices rebounded.

Hours after China’s Shanghai stock index slumped to close 7.6 percent lower — adding to Monday’s 8.5 percent loss and taking the benchmark to its lowest level since Dec. 15 — the central bank swung into action.

It cut its interest rates for fifth time in nine months in a renewed effort to shore up economic growth in the world’s second-largest economy. The central bank said the benchmark rate for a one-year loan will be cut by 0.25 percentage point to 4.6 percent and the one-year rate for deposits will fall by a similar margin to 1.75 percent.

The bank also increased the amount of money available for lending by reducing the minimum reserves banks are required to hold by 0.5 percentage points.

The move came as Beijing appeared to be abandoning a strategy of having a state-owned company buy shares to stem the market slide. There have been no signs of large-scale purchases by the China Securities Finance Corp. during the past week.

“The fear is that the Chinese economy is slowing at an alarming pace and that the domestic policy makers have fallen well behind the curve,” said analyst at Credit Agricole CIB in a report.

Tokyo’s Nikkei 225 earlier closed down 4 percent after sliding 4.6 percent Monday.

But other markets in Asia posted modest recoveries. Hong Kong’s Hang Seng index rose or 0.7 percent, while Sydney’s S&P ASX 200 gained 2.7 percent and Seoul’s Kospi index and Singapore’s Straits Times index also rose.

In morning trading in Europe, France’s CAC-40 jumped 4.6 percent after tumbling 5.4 percent Monday while Germany’s DAX was up 4.4 percent after dropping 4.7 percent the day before. Britain’s FTSE 100 was 3.4 percent higher.

Dow Jones and S&P 500 index futures were both up 3.7 percent, an indication the U.S. market was set to open higher.

Wall Street had a stomach-churning day Monday, when the Dow plunged more than 1,000 points at one point before finishing down 588.40 points, or 3.6 percent, at 15,871.35. The Standard & Poor’s 500 index slid 77.68 points, or 3.9 percent, to 1,893.21, and is now in “correction” territory, Wall Street jargon for a drop of at least 10 percent from a recent peak. The last market correction was nearly four years ago.

In currency markets, the dollar rose to 120.26 yen from Monday’s 118.69 yen. The euro fell to $1.1461 from the previous session’s $1.1591

Oil rebounded from Monday’s steep declines.

Benchmark U.S. crude gained $1.31 to $39.55 per barrel in electronic trading on the New York Mercantile Exchange. The contract plunged $2.21 on Monday to close at $38.42.

 

 

TIME China

China Struggles to Stay Rosy as Confidence and Markets Plummet

The Aug. 24 stock-market disarray was dubbed Black Monday

Monday was a really bad day for global stocks, and the Chinese state-run media duly covered the volatility. But the official Chinese press was more reticent in its coverage of China’s own stock-market rout, which triggered the worldwide sell-off.

On Monday, the Shanghai Composite Index dropped 8.5%, the worst decline since 2007. Tuesday saw a 7.6% fall. The latest drop in a summer of sell-offs means that the once buoyant Chinese bourse has shed more than $4 trillion since peaking in June — either a much-needed correction of an overheated market that had more than doubled in a year or a symbol of China’s more troubling economic slowdown, or quite likely both.

Even as punters counted their losses and one group even briefly kidnapped the head of a metals exchange in Shanghai, Monday evening’s prime-time newscast on CCTV, the state broadcaster, totally ignored the nation’s market woes. On Tuesday, as the Shanghai exchange opened 6.4% lower, the People’s Daily, the mouthpiece of the Chinese Communist Party, published a dispatch from Shanghai that reported not on the market fallout but instead on the installation of 12,000 sensors on manholes in one city district. The manholes, whose safety is apparently looked after by 19 separate agencies, will be monitored by satellite.

Control — even on manholes — is something with which China’s ruling Communist Party is clearly enamored. Chinese President Xi Jinping has consolidated power surprisingly quickly since taking over in late 2012 and will use the occasion of the 70th anniversary of Japan’s defeat in China to project his authority. A Sept. 3 military parade is planned, with world leaders (and some former ones, like Tony Blair) gathered to check out China’s latest in martial hardware.

But the past few weeks haven’t exactly gone according to the party’s plan. Earlier this month, a chemical explosion in Tianjin, which killed at least 129 people, coupled with official media obfuscation, dented confidence in the party’s leadership and commitment to transparency. Earlier in the summer, the government’s unprecedented stock-market intervention only served to spook investors, leading to further declines. This past weekend, the government announced that Chinese pension funds would be allowed to invest one-third of their capital in the stock market — yet another move to try to prop up the nation’s bourses. The move was followed by Black Monday, as the Aug. 24 stock-market disarray has been dubbed. “The government still thinks it can control everything,” says Mose Ma, who works for a venture-capital firm in Beijing. “But this is the stock market, and markets fluctuate. It abides by its own logic and rules.”

Most Chinese don’t trade in stocks and foreigners only own a tiny percentage of China-listed shares. Still, the market rout, along with the Chinese government’s bungled attempts to bring stability to the market, has raised larger questions about the health of the world’s second largest economy — and the competence of its stewards. After decades of double-digit growth, China’s economy is slowing. With the nation cutting back on commodities and imports, countries that depend on Chinese consumption are bracing for impact. And for a generation of Chinese accustomed to torrid growth, the new normal is frightening to behold.

Griffin Gao, a project manager for a financial-leasing company in Shenzhen, says he escaped Black Monday only because the stocks he holds are still frozen because of an earlier suspension in trading due to steep losses. “I’m not very confident,” he says, noting that most of his customers are from the manufacturing industry and that many have closed shop in China and are now building factories in Southeast Asia. “China’s infrastructure-construction boom is over.”

In the meantime, China’s official press is focusing on preparations for the upcoming military parade. Many local papers reserved prime front-page space to articles on shock and awe, including live-fire naval drills scheduled to take place off the eastern coast of China over the next three months. Diversionary tactics are just as useful for propaganda artists as they are for military strategists.

— With reporting by Gu Yongqiang / Beijing

MONEY correction

3 Charts That Explain the Stock Market’s Huge Drop

The market closed 11% off its May peak Monday.

On Monday, the stock market entered what Wall Street pros term a “correction,” a decline of 10% or more from the market’s previous peak, which occurred in May. No one likes to see their portfolio knocked down a peg, but it’s not the end of the world.

Here are some stats to put recent event into context, and perhaps help you relax a little.

It’s been a surprisingly long time since stocks fell by this much.

The last time the market dropped at least 10% was in October 2011. That’s one of the longest stretches of uninterrupted growth since World War II. So you might say we were due; typically, there’s a market correction every 18 months.

Source: S&P Captal IQ

Most 10% drops don’t lead to bear markets.

Most of the 30-odd corrections the market has endured since 1946 didn’t deteriorate into a bear market, defined as a decline of 20% or more from the previous peak.


Just holding on usually solves the problem.

Usually, but not always, investors who waited out a correction found themselves quickly back in the black.

Source: S&P Capital IQ/Bloomberg

Read next: Why Bonds Soared After Monday’s Stock Market Crash

MONEY Planning

Have You Looked at Your Retirement Accounts Lately?

As a retirement investor, you are supposed to take the long view—ignoring one-day (or one-week) plunges in the stock market, sticking to your financial plan, and staying focused on a finish line that may be decades away. But you’re also a human being, who reads the news and wonders what a 588-point, one-day drop in the Dow has done to your 401(k) or IRA balance. This is your nest egg, after all. So after last week’s pullback in stock prices and today’s gut-wrenching drop, you couldn’t be blamed for sneaking a peek, even if it’s better not to check in daily. Have you?

TIME Markets

Rollercoaster Day on Wall Street as U.S. Stocks Slump at Close

Signs of economic slowdown in China continue to affect the U.S. stock market

U.S. stocks slid again Monday, with the Dow Jones industrial average briefly plunging more than 1,000 points in a sell-off that sent a shiver of fear from Wall Street to Main Street.

Stocks regained some of that ground as the day wore on, but the Dow finished with a loss of 588 points, the eighth-worst single-day point decline and the second straight fall of more than 500.

The slump — part of a global wave of selling touched off by signs of a slowdown in China, the world’s second-largest economy — triggered worries among Wall Street professionals and ordinary Americans who are saving for retirement or a down payment on a house.

With the lease on her car up, health insurance worker Deirdre Ralph of Wayne, New Jersey, had planned to get a less pricey vehicle and invest the savings. Now she’s having doubts.

“That money, I wanted to take and put it toward my retirement,” said Ralph, 61. “Should I? Or should I just have a great old time?”

The Dow ended up losing 588.47 points, or 3.6 percent, closing at 15,871.35. As scary as the sell-off was, the Dow’s decline doesn’t even make the list of the Top 10 biggest drops in percentage terms.

The Standard & Poor’s 500 index slid 77.68 points, or 3.9 percent, to 1,893.21, and is now in “correction” territory, Wall Street jargon for a drop of at least 10 percent from a recent peak. The last market correction was nearly four years ago.

The Nasdaq composite shed 179.79 points, or 3.8 percent, closing at 4,526.25.

All three major indexes are down for the year.

“There is a lot of fear in the markets,” said Bernard Aw, market strategist at IG.

U.S. stocks have been on a bull run for more than six years, after bottoming out in March 2009 in the aftermath of the financial crisis and the Great Recession. The rout began in China last week and continued on Monday, when the country’s main stock index sank 8.5 percent.

China concerns aside, U.S. stocks have been primed for a sell-off for several months, said Jim Paulsen, chief investment strategist and economist for Wells Capital Management.

“I’ve been of the view since late last year that this market is in a vulnerable position,” he said. “It’s gone almost straight up for six years.”

Stocks have kept rising even as corporate earnings growth has slowed. The price-earnings ratio for the S&P 500, a measure of how much investors are willing to pay for each dollar of company earnings, climbed as high as 17.2 in March. That was the highest level in at least a decade, according to FactSet.

The Dow plummeted 1,089 points Monday within the first four minutes of the opening bell as traders dumped shares. But a wave of buying by bargain-hunters cut the Dow’s losses by half just five minutes later.

The U.S. market slide was broad. The 10 sectors in the S&P 500 headed lower, with energy stocks recording the biggest decline, 5.2 percent, amid a slump in the price of oil. The sector is down almost 25 percent this year.

U.S. Treasurys surged as investors bought less risky assets. The yield on the benchmark 10-year note fell to 2.01 percent from 2.04 percent.

Oil, commodities and the currencies of many developing countries also tumbled on concerns that a slowdown in China might hurt economic growth around the globe. Crude oil closed below $40 a barrel for the first time since early 2009. Gold and silver also fell.

In Europe, Germany’s DAX stock index fell 4.7 percent, while the CAC-40 in France slid 5.4 percent. The FTSE 100 index of leading British shares dropped 4.7 percent.

In Asia, Japan’s Nikkei index fell 4.6 percent, its worst one-day drop since in over 2½ years. Hong Kong’s Hang Seng index fell 5.2 percent, Australia’s S&P ASX/200 slid 4.1 percent, and South Korea’s Kospi lost 2.5 percent.

The Shanghai index suffered its biggest percentage decline in 8½ years. China is facing a slowdown in economic growth, the banking system is short of cash, and investors are pulling money out of the country.

___

AP Writer Deepti Hajela contributed to this report from New York.

 

TIME stock market

4 New Truths from the Stock Market Crisis of 2015

This is the world we live in post-2008 financial crisis

Smartphones, light fixtures and cheap shoes aren’t the only thing made in China. The next global recession might be, too.

This week’s international market rout, triggered by the biggest fall in Shanghai markets since 2007, has brought nearly every asset class down with it—European markets, U.S. stocks, global commodities, emerging market bonds, and so on. The U.S. has clawed back some early losses on August 24 already, but investors are jittery that the plunge in the Chinese market portends some larger sea change in global markets. Many are wondering if the world is entering a period like the Asian financial crisis of 1997 or even, God forbid, the worldwide slowdown of 2008.

I don’t think either are likely, but here’s what the global market crash is telling us:

1. The global debt crisis of 2008 hasn’t gone away—it’s just moved to China. Lots of analysts like to talk about how much “deleveraging” has been done by Western consumers and companies since the financial crisis. That’s true, but debt, like energy, doesn’t disappear—it just takes on new forms. When American consumers stopped buying stuff after the subprime crisis, China tried to take up the slack in the form of a massive government stimulus program. This meant a major run up in debt: A few years back, it took a dollar of debt to create every dollar of growth in China. Now it takes four times that. The debt-to-GDP ratio in China is a nauseating 300%. (American debt hawks worry about our rate, which is less than a third of that.)

A couple of years ago, that bubble started to burst. The Chinese government tried to stop it, by propping up one market after another, from housing to stocks. But now, having spent $400 billion to buoy overpriced stock markets in the last few weeks, they’ve realized they have to give in to gravity and let the markets fall. That fall is an acknowledgement that the government can’t micro-manage the Chinese economy forever. But investors don’t trust that China is going to be able to move smoothly from a state-run economy to a consumption led one (whatever Tim Cook might say about Apple phone sales in the Middle Kingdom). It’s a shift that only three countries in Asia have ever made—Japan, South Korea, and Singapore.

2. A slowdown in China is now a much bigger deal than it used to be. During the Asian financial crisis of the late 1990s, U.S. growth powered ahead. But the size of the Chinese economy has grown wildly since then. China made up about a third of all global growth over the last decade, even more than the US (which made up 17%). “This represents a major break from the past,” as Morgan Stanley’s chief macroeconomist Ruchir Sharma has pointed out. “Historically, the U.S. has been the single largest contributor to global growth, and a contraction in the American economy has been the catalyst that tipped the world into recession.” Now, it may be China that has that dubious role. While government statistics still say China is growing at 7%, Sharma puts that figure closer to 5%—which may not be enough to stave off a global recession.

3. This isn’t a disaster for the US, but it’s not good. U.S. companies aren’t as exposed to China as many emerging market countries. But U.S. companies do get a third of their earnings internationally now, about twice the rate in the 1990s. A fall in Shanghai isn’t going to tank our markets a la 2008 or push the U.S. itself back into recession, assuming that our own recovery continues at the current pace. But it will mean that we stay basically where we are, hovering somewhere between 2% and 3% growth, with stagnant wages, and not enough steam to turn the current recovery into something more robust. The downturn in China will add to the deflationary effects already at play in the economy, which will make it harder for employers to give raises, and tough to imagine much stronger growth in a U.S. economy made up 70% of consumer spending. That could make it hard for the Fed to hike interest rates in September (which would, in turn, draw out the already large and worrisome corporate debt bubble that has grown to record highs fueled by low-interest rates).

4. The world is still awaiting a true fix to the financial crisis of 2008. China isn’t the only place debt flowed after companies and consumers offloaded it following the subprime crisis. Governments around the world are holding more debt than ever before thanks to their efforts to buoy things post 2008. That means they are out of ammo to bolster the global economy with more fiscal stimulus, or, in the case of the U.S., with more central bank money dumps. Meanwhile, as interest rates rise, the corporate margin debt and share buybacks that have been fueling the market buzz will end, too. “The market hasn’t experienced even a 10% correction since late 2011,” says Sharma. “So, it was vulnerable to some bad news.” The solution now isn’t more easy money, but to create real growth, the old-fashioned way—with big infrastructure projects, more support for the innovative new businesses that create most of the jobs in the country, and so on. Tough stuff, and not something that will happen quickly.

The takeaway: the debt and central bank fueled market boom of the last few years is officially coming to an end. Keep your money in U.S. blue chips and T-bills (they are still the safest thing going). But be prepared for much more volatility, which is already much higher this year than last. And don’t expect anywhere near the kinds of portfolio gains you saw over the last couple of years.

TIME stock market

Global Markets Hammered as Dow Plunges Over 1,000 Points

Market carnage carries over into another day as world markets slump

The global market carnage carried over into another session Monday, as U.S. stocks plummeted again as soon as morning trading began after Chinese stocks continued their plunge, sparking another worldwide sell-off.

The Dow Jones industrial average opened trading down more than 1,000 points, or 5%, but was lately working off those heavy losses. The index was down 1,089 at the session low, and it fell below 16,000 points for the first time since mid-October. Dow futures were down more than 700 points ahead of Monday’s market open, and the blue chip index is now more than 2,200 points behind where it started the year.

The Nasdaq composite index also plunged dramatically once trading kicked off, dropping over 400 points, or more than 8%. The S&P 500 quickly fell more than 100 points, or about 5%.

In an attempt to dampen the effect of market volatility at the opening, the New York Stock Exchange on Monday invoked the rarely-used Rule 48, which allows the exchange to open trading without price indicators

U.S. stocks on Monday picked up where they left off last week, when all three major indices fell by roughly 6% and the Dow lost more than 1,000 points over five days.

As was the case with last week’s sell-off, Monday’s decline comes amid fears over the struggling economy in China, where the Shanghai stock exchange had its worst day of trading in roughly eight years, falling 8.5% on what has been dubbed “Black Monday.” The financial troubles in China compounded fears that the country’s government may not be able to deliver on its promise of a “soft landing” for its economy, which led to stocks falling in other major global economies on Monday.

“Until we have some sign that China and the emerging markets aren’t being sucked into some vortex from which they can’t recover … it is unlikely this selloff will stem,” Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia, told Reuters.

Wall Street’s slide last week showed investors are increasingly worried about paying high prices for stocks at a time of mediocre earnings growth. They’re also nervous about sliding energy prices, and an expected rate hike by the U.S. Federal Reserve.

London’s FTSE 100 and Germany’s DAX each fell by nearly 4% on Monday and commodity prices continued their recent slide, with U.S. crude oil prices dropping below $40 per barrel to hit a new 6 1/2-year low.

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