(Collapse.news) Stocks extended losses on Friday as the Dow Jones Industrial Average briefly plunged more than 500 points before rebounding somewhat, only to lose ground again.
The session’s steep decline – 3 percent of the index’s value – comes amid chaotic market conditions around the world, turmoil that some analysts describe as fallout from an unexpected Chinese yuan devaluation last week.
As noted by CNBC, the Dow’s plunge and gain signaled a roller coaster day as the index dipped in and out of correction territory for the first time since 2011, as all blue-chip stocks lost ground.
Over the last five years, the Dow has only experienced four instances with closing losses of more than 400 points.
“For investors the momentum and the drive of the market is now lower (than) it used to be because there’s no place to hide,” said Lance Roberts, general partner at STA Wealth Management. “Every time we hit the major technical points we kept selling.”
Fear emerging economies will stop importing as much
Some traders noted that investors stopped looking at technical trends and rapidly selling off stocks.
“It’s an expiration day and it looks like they’re to have for sale on the close maybe as much as a billion dollars,” Art Cashin, director of floor trading for UBS, told CNBC.
In interviews with the cable financial news network, some traders were unsure of just how far down the floor would go, suggesting that it might be a couple of days or even weeks before all of the damage could be tallied.
“Right now there is a feeling of fear in the marketplace and all news is interpreted negatively and it’s interpreted indiscriminately,” said Tom Digenan, head of U.S. equities at UBS Global Asset Management.
“We’re trying to figure out if this is capitulation,” said Stephen J. Guilfoyle, the managing director of NYSE floor operations for Deep Value Inc., while being interviewed by CNBC. “Volume is higher” due to a couple of factors including expiration, “so we’re not really gonna know until Monday or Tuesday and maybe… maybe through October.”
He also noted that trade volumes have been much higher than normal, especially this week.
“Yeah, volume is higher, there is some conviction in this selling, people really are scared,” he said. “We’re seeing a little of that 1987-like fear, not a lot of it, but it has creeped [sp] into the talk a little bit.”
The trader said investors were not fearful of the Federal Reserve and any policy position it might take to raise interest rates. Rather, he said, the fear was rooted overseas.
“They’re scared of the global demand situation [which is down], they’re scared of China, they’re scared that maybe there’s no place to make money,” he continued. “If the stock market’s not going to make you money, where do you make it now?”
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Currencies tanking as well
In addition to the Dow’s poor showing, the NASDAQ composite also closed down 3.5 percent, giving investors pause ahead of an uncertain weekend.
As Wall Street hemorrhaged, so, too, did markets in Europe and Asia, as well as currencies around the world.
The Associated Press noted:
In emerging markets worldwide, currencies are plunging over fears that developing economies are on the verge of a crippling fall. Success stories until recently, emerging economies are seen as casualties now — of slower growth in China, plunging prices for commodities like oil and iron ore, the prospect of higher U.S. interest rates and homegrown threats.
Investors in New York, Europe and Tokyo – all concerned about growth – voiced concerns that China and other emerging economies will reduce their imports as their own economies slow. In addition, some fear a trade-disrupting currency war as some nations, in desperation, lower the value of their currencies, as China has done, to get a more competitive edge; a lower-priced currency makes a country’s goods cheaper, and thus more desirable, for foreigners.
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