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China Sell-Off Spreads To Wall Street As Stock Market Leaders Tumble

A sell-off in Chinese stocks spread to other world markets, sending the U.S. stock market down sharply Monday morning. Landmark U.S. stocks such as Apple (AAPL) and Alphabet (GOOGL) were mainly lower.




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Monday’s stock market saw the S&P 500 slide 1.5% and the Dow Jones Industrial Average 1.4%. On the Dow, cyclicals Caterpillar (CAT) and Dow Inc. (DOW) fell to February lows. Visa (V) dropped to an April low. Goldman Sachs (GS), JPMorgan Chase (JPM) and several other Dow components also gapped lower.

The Nasdaq composite dropped 1.7% as tech heavyweights Apple and Alphabet gapped down in heavy trading, with Alphabet falling just below the 50-day moving average.

Other stock market pillars also saw heavy declines as their charts weakened considerably. Amazon.com (AMZN) gapped 2% lower and is now below the 50-day line. Facebook (FB) also gapped below the 50-day average.

U.S. Stock Market Today Overview

Index Symbol Price Gain/Loss % Change
Dow Jones (0DJIA) 34090.87 -494.01 -1.43
S&P 500 (0S&P5) 4367.10 -65.89 -1.49
Nasdaq (0NDQC ) 14791.16 -252.81 -1.68
Russell 2000 (IWM) 217.95 -4.42 -1.99
IBD 50 (FFTY) 49.48 -1.10 -2.17
Last Update: 10:08 AM ET 9/20/2021

Volume was higher on the Nasdaq and lower on the NYSE than at the same time on Friday. But expect volume to drop off as the day goes by. Volume surged Friday on a quadruple witching session in which options and futures expired simultaneously.

Chinese Stock Market Rattled

Hong Kong’s Hang Seng plummeted 3.3% Monday, the largest one-day loss since July 27. The Hang Seng is now down 27.3% from its record close of 33,154.12 on Jan. 26, 2018, according to Dow Jones Market Data. The Shanghai and Nikkei stock markets were closed Monday.

The iShares China Large Cap ETF (FXI) plunged 3.3%, while Invesco China Technology (CQQQ) fell 3%. Chinese stocks already had been struggling before today’s sell-off.

Investors are increasingly concerned that Beijing will let property developer China Evergrande Group fail, resulting in losses for shareholders and bondholders. The real estate company’s debt burden is the biggest for any publicly traded real estate management or development company in the world, according to The Wall Street Journal.

In Europe, the London FTSE was off 1%, Germany’s DAX fell 2.2% and the Paris CAC 40 was down 1.9%.

Many indicators pointed to widespread investor fear.

Indicators Show Stock Market Fear Rising

The Cboe Volatility Index surged. The Dow Jones FXCM Dollar Index rose 2.7%, to the highest since Aug. 23.

After three days of gains, bond yields sank. The yield on the 10-year Treasury note fell 4 basis points to 1.33%. Oil prices fell nearly 2% to $70.74 a barrel.

On Friday, IBD lowered its stock market outlook to “uptrend under pressure” after the S&P 500 closed below its 50-day moving average. A rebound off the line Wednesday struggled for momentum. Some new breakouts also have struggled to follow through from buy points.

With a tempered outlook, investors need to be more guarded. Any new stock purchase should be only for exceptional stocks. Taking some profits is smart right now. Be sure to cut losses short.

Innovator IBD 50 fell 2.5%. IPO stocks in the list had some of the largest losses. Doximity (DOCS) gapped down more than 6%. DLocal (DLO) gapped to a loss of 5.5%. Global-e Online (GLBE) fell 3.5%.

Kulicke & Soffa (KLIC), Shockwave Medical (SWAV), Atkore (ATKR) and Progyny (PGNY) fell more than 4%.

Juan Carlos Arancibia is the Markets Editor of IBD and oversees our market coverage. Follow him at @IBD_jarancibia

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