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US stocks plummet; Dow sinks below correction threshold

TNS Regional News • Sep 1, 2015 at 6:10 PM

U.S. stocks plunged Tuesday, with the Dow Jones industrial average dropping nearly 3 percent, or about 470 points.

The broad-based Standard & Poor’s 500 index fell more than 55 points, or nearly 3 percent as well.

The sell-off in U.S. shares followed similarly deep slides in Europe and Asia as investors reacted to fresh news of China’s economic slowdown.

Germany’s DAX and France’s CAC 40 both dropped nearly 2.5 percent, and Britain’s FTSE fell just over 3 percent. In Asia, China’s Shenzhen market was off 4.6 percent and the Shanghai composite 1.2 percent. Japan’s Nikkei index lost 3.84 percent

The main driver of the global slide was the release of China’s official manufacturing purchasing-managers index, which fell to 49.7 in August from 50 a month ago, falling short of market forecasts of 49.8. Investors interpreted the figures as showing signs of contraction.

That world markets reacted with such force to relatively small moves in a formerly obscure Chinese economic metric showed the degree of anxiety that has gripped investors over the true nature of China’s economic performance and concerns over the country’s leadership to deal with it. China has taken a range of extraordinary fiscal, economic and financial measure to reassure investors, with little success so far.

By midmorning Tuesday, the Dow had slipped 11 percent below its May 21 peak, putting the index into what is generally described as a correction, a drop of 10 percent or more. The Dow was off more than 9 percent for the year. The S&P was off about 9 percent from its May peak and more than 6 percent for the year.

The questions hanging over the markets revolve around the depth of China’s economic troubles and the degree to which the U.S. economy can continue to expand in the midst of sluggish growth around the world.

Russ Koesterich, global chief investment strategist for New York’s BlackRock Inc., noted that the U.S. economy “is now holding up relatively well despite the challenges in China and some other emerging markets.”

Amid the international market turmoil, investors will be paying particular attention to the monthly U.S. employment report for August. The report, scheduled to released by the Commerce Department on Friday, will include nonfarm payrolls, the unemployment rate, average hourly earnings and other data documenting the health of the recovery.

Randy Frederick, Schwab’s managing director of trading and derivatives, called it the “biggest group of reports this month.”

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By Dean Starkman - Los Angeles Times (TNS)

©2015 Los Angeles Times

Visit the Los Angeles Times at www.latimes.com

Distributed by Tribune Content Agency, LLC.

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