US markets plunge on opening, Dow briefly sinks over 1,000 points before paring losses

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City.PHOTO: AFP

NEW YORK (AFP, BLOOMBERG, REUTERS) - US stock markets entered correction territory on Monday (Aug 24), with the Dow sliding below 16,000 for the first time since February 2014 following a more-than 8 per cent drop in Chinese stocks and a selloff in oil and other commodities.

After the opening bell, the Dow Jones industrial average fell 955.93 points, or 5.81 per cent, to 15,503.82, the S&P 500 lost 94.92 points, or 4.82 per cent, to 1,875.97 and the Nasdaq composite dropped 378.08 points, or 8.03 per cent, to 4,327.96.

Afer briefly falling over 1,000 points, the Dow pared its losses. At 9:38 am ET (1338 GMT) the Dow was down 830.66 points, or 5.05 per cent, at 15,629.09, the S&P 500 was down 91.46 points, or 4.64 per cent, at 1,879.43 and the Nasdaq Composite was down 282.50 points, or 6 per cent, at 4,423.54. All 10 major S&P 500 sectors fell, with health and technology falling more than 6 per cent. All stocks in the Dow were in the red.

The Dow has never lost more than 800 points in a day.

Futures on the Nasdaq, S&P and Dow indexes were halted briefly before the market opened after hitting a circuit breaker, a step taken by exchanges to reduce volatility and give investors time to assess information.

With Monday's selloff, the S&P 500 index and the Nasdaq composite slipped into correction mode, joining the Dow, which slid into correction territory on Friday. An index is considered to be in correction when it falls 10 per cent from its 52-week high.

US crude oil prices continued to fall in New York, diving below US$40 a barrel to their lowest level since 2009, amid the global market selloff sparked by fears of China's slowdown.

US benchmark West Texas Intermediate for October delivery tumbled by US$1.39 to US$39.06 a barrel on the New York Mercantile Exchange around 1305 GMT. On Friday the contract had slipped briefly below US$40 for the first time since February 2009. Brent, the international benchmark, also sank sharply in London trade to its lowest level since early 2009.

"We're seeing equity markets in Asia implode and there definitely is a lot of risk-off sentiment," said Bart Melek at TD Securities.

The Shanghai stock market plunged 8.5 per cent Monday, its sharpest one-day fall in eight years, as concerns mounted about the slowdown in China's economy, the world's largest energy importer.

The US dollar slumped to a seven-month low against the euro and the yen as most traders concluded the Federal Reserve will refrain from raising interest rates next month amid the global stock-market rout. The greenback fell to the lowest since January as declining commodity and share prices deepened a plunge in emerging-market currencies that started after China's shock devaluation of the yuan on Aug. 11.

The dollar fell 2.4 per cent to US$1.1663 per euro at 9:23 am in New York after falling as low as 1.1714, the weakest since Jan. 15. It dropped 3.8 per cent to 117.44 yen after reaching 116.18, the lowest since Jan 16.

"Markets are very nervous about the growth outlook for China and the possible impacts on the dollar," Georgette Boele, a currency strategist at ABN Amro Bank NV, said by phone from Amsterdam.