Wall Street suffered one of its most volatile sessions in years Monday, with the Dow industrials plunging more than 1,000 points in the opening minutes, bouncing back to recover most of the losses and then fading into the final bell to record the biggest drop in four years.
Meanwhile the main benchmark S&P 500 slipped into correction territory, having fallen more than 10% from its peak reached on May 21.
“Short-term fear of the unknown is still in the driver’s seat, I would expect more volatility in the coming weeks,” said Kate Warne, investment strategist at Edward Jones.
Indeed, Monday’s trading session saw the main indexes plunge by more than 5%. Nearly 14 billion shares changed hands on Monday, the largest volume since August 10, 2011.
Investors remained concerned about global growth in the face of plummeting commodity prices and slowing growth in China, the second largest economy in the world.
The Dow Jones Industrial Average DJIA, -3.57% ended the day down 588.47 points, or 3.6%, at 15,871.28—its lowest settlement since February 2014. All 30 members of the Dow finished the day in negative territory.
The S&P 500 SPX, -3.94% dropped 77.68 points, or 3.9%, to 1,893.21, the lowest level since October 2014. The index is down 8% year to date. Nearly all 500 members of the index closed with a loss.
Both the Dow and the S&P 500 scored their biggest one-day percentage declines since August 2011.
The Nasdaq Composite COMP, -3.82% ended the day down 179.79 points, or 3.8% at 4,526.25.
“Trading volumes are driven by ETFs today, but we are not seeing a lot of panic, where people dump large amounts of stocks in one go. There are still buyers out there, who are picking up stocks that have seen large corrections. However, volatility is back, so seeing large intraday and day-to-day swings is not surprising,” said Brian Fenske, head of sales trading at ITG.
Sal Arnuk, co-head of equity trading at Themis Trading, described Monday’s open as painful. “There’s definitely blood on the street. You can check the level of the VIX,” Arnuk said.
Implied volatility on the S&P 500, as measured by the CBOE Volatility Index VIX, +45.34% jumped to 38, significantly above the long-term average of 20. Investors piled into Treasurys, briefly pushing the yield on the 10-year note below 2%. Bond yields move inversely to prices.
Many investors expected the People’s Bank of China to take some action over the weekend to support the financial system. In the absence of any move, a brutal bout of selling overtook markets. The Shanghai Composite Index SHCOMP, -8.49% closed down 8.5%.
Ric Edelman, chief executive officer and chairman of Edelman Financial Services, said that his firm hasn't experienced a barrage of calls from panicky clients.
“It appears that most of the selling is done by algorithms and institutional investors rather than retail investors. We think that’s because retail investors have learned their lesson of 2008: that the best thing to do at a time like this is nothing,” Edelman said.
Stocks to Watch: Shares of Apple Inc. AAPL, -2.50% switched between big losses and big gains. Share closed down 2.5%, after opening down more than 4.3%. The stock entered bear-market territory on Friday.
Energy stocks suffered as the U.S. crude benchmark CLV5, +0.24% struggled to hold above $38 a barrel.
But AGL Resources Inc. GAS, +28.31% soared 28% after the energy company received a $12 billion buyout bid from Southern Company. SO, -4.85%
NIK, -4.61% Other markets: In addition to the Shanghai Composite’s heavy losses, the Nikkei 225 index NIK, -4.61% slid 4.6%, pressured by a strong Japanese yen. Investors flocked to the perceived safe haven of the yen, pushing the dollar USDJPY, +0.06% and other rivals lower.
In Europe, stocks followed Asia’s lead as the Stoxx Europe 600 dropped 5.3%, falling deeper into correction mode.
Gold prices GCZ5, +0.01% failed to score any gains on Monday, despite its reputation as a refuge in times of market turmoil. The yellow metal fell 0.5% to settle at $1,153.60 an ounce.