Dow Sheds Nearly 600 Points, S&P 500 in Correction in a Wild Day on Wall Street
U.S. stocks plunged more than 3.5 percent on Monday, closing off session lows in high volume trade as fears of slowing growth in China pressured global markets.
S&P 500 ended nearly 80 points lower, off session lows of about 104 points lower but still in correction territory after the tech sector failed intraday attempts to post gains. Cumulative trade volume was 13.94 billion shares, the highest volume day since Aug. 10, 2011.
The major averages had a volatile day of trade, plunging sharply in the open and more than halving losses to trade less than 1 percent lower on the day, before closing down more than 3.5 percent.
"I think we probably rallied too fast. A lot of people that covered their shorts got their shorts covered," said Peter Coleman, head trader at Convergex. He noted the Dow was still trading several hundred points off session lows and that a close better than 500 points lower would be a good sign.
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"The market's going to be focused on China tonight to see if they come on tonight with something that would be considered a viable (way) to stimulate growth in that economy," said Quincy Krosby, market strategist at Prudential Financial.
The Dow Jones industrial average ended nearly 600 points lower after trading in wide range of between roughly 300 to 700 points lower in the minutes leading up to the close.
In the open, the index fell as much as 1,089 points, making Monday's move its biggest intraday swing in history. In midday trade, the index pared losses to trade about 110 points lower.
The blue-chip index posted its biggest 3-day point loss in history of 1,477.45 points.
During the first 90 minutes of trade, the index traveled more than 3,000 points in down and up moves.
"I'm hoping for some stability here but I think markets remain very, very vulnerable to bad news (out of) emerging markets," said Dan Veru, chief investment officer at Palisade Capital Management.
He attributed some of the sharp opening losses to exchange-traded funds. "It's so easy to move a bajillion dollars in a nanosecond."
Trading in stocks and exchange-traded funds was paused more than 1,200 times on Monday, Dow Jones said, citing exchanges. Such pauses total single digits on a normal day, the report said. An increase or decline of five percent or more triggers a five-minute pause in trading, Dow Jones said.
The major averages came sharply off lows in midday trade, with the Nasdaq off as low as less than half a percent after earlier falling 8.8 percent. Apple traded more than 1.5 percent lower after reversing losses to briefly jump more than 2 percent.
"There was sort of a lack of follow-through after the morning's crazy action in the overall market," said Robert Pavlik, chief market strategist at Boston Private Wealth. "The selling really dissipated once we got to around 10 o'clock."
He attributed some of the late morning gains to a short squeeze and bargain hunting.
Art Hogan, chief market strategist at Wunderlich Securities, noted that the sharp opening losses were due to great uncertainty among traders and the implementation of a rare market rule.
The New York Stock Exchange invoked Rule 48 for the Monday stock market open, Dow Jones reported.
The rule allows NYSE to open stocks without indications. "It was set up for situations like this," Hogan said. The rule was last used in the financial crisis.
Stock index futures for several major indices fell several percentage points before the open to hit limit down levels.
Circuit breakers for the S&P 500 will halt trade when the index decreases from its previous close by the following three levels: 7 percent, 13 percent, and 20 percent.
"Fear has taken over. The market topped out last week," said Adam Sarhan, CEO of Sarhan Capital. "We saw important technical levels break last week. Huge shift in investor psychology."
"The market is not falling on actual facets of a sub-prime situation. It's falling on fear of the unload of China. That's really behind this move," said Peter Cardillo, chief market economist at Rockwell Global Capital.
The CBOE Volatility Index (VIX), considered the best gauge of fear in the market, traded near 40. Earlier in the session the index leaped above 50 for the first time since February 2009.
"When the VIX is this high it means there's some panic out there," said Randy Frederick, managing director of trading and derivatives at Charles Schwab.
However, he said with stocks more than halving losses he "wouldn't be surprised if we closed positive." "If you could move it that far you could move it another 350 points" on the Dow," he said.
Overseas, European stocks plunged, with the STOXX Europe 600 down more than 5 percent, while the Shanghai Composite dropped 8.5 percent, its greatest one-day drop since 2007.
Treasury yields came off session lows, with the U.S. 10-year yield at 2.01 percent and the 2-year yield at 0.58 percent.
The U.S. dollar fell more than 1.5 percent against major world currencies, with the euro near $1.16 and the yen stronger at 119 yen versus the greenback.
A U.S. Treasury Department spokesperson said in a statement that "We do not comment on day-to-day market developments. As always, the Treasury Department is monitoring ongoing market developments and is in regular communication with its regulatory partners and market participants."
The Dow transports ended more than 3.5 percent lower to approach bear market territory.
About 10 stocks declined for every advancer on the New York Stock Exchange, with an exchange volume of 901 million and a composite volume of 4 billion as of 2:05 p.m.
Crude oil futures settled down $2.21, or 5.46 percent, at $38.24 a barrel, the lowest since February 2009. In intraday trade, crude oil futures for October delivery fell as much as $2.70 to $37.75 a barrel, a six-and-a-half-year low.
Gold futures settled down $6.10 at $1,153.60 an ounce.
This post originally appeared on CNBC. Read More at CNBC:
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Undertrained Military Drone Pilots Have Senators Steaming
Lawmakers on Capitol Hill sent a scathing letter to Defense Secretary Ash Carter this week slamming the Pentagon for allowing Air Force and Army pilots to operate predator drones without completing their necessary training.
The revelation came in a report published last week by the Government Accountability Office that said most drone pilots never finished all of their training because of pilot shortages and a lack of planning and strategy within the Defense Department.
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The report said that just about 35 percent of Air Force pilots had completed training for all their required missions. Separately, the Army had not been keeping sufficient pilot training records. “As a result, the Army does not know the full extent to which pilots have been trained and are therefore ready to be deployed,” the report said.
In the letter to Carter, Sen. John McCain (R-AZ), chairman of the Senate Committee on Armed Services, and Sen. Jack Reed (D-RI), the ranking member of the committee, said they were “disturbed that the Department of Defense has no standardized training program for [unmanned aerial system] pilots and personnel.”
"The continued lack of consistent and uniform training standards is simply unacceptable. In addition to collecting critical intelligence, the department's UAS programs carry out sensitive strike missions that should require high standards and specialized training,” the letter said.
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The senators slammed the Air Force for its lax training efforts and demanded that the military improve its process and resolve the pilot shortages.
"These pilot shortages have constrained training and place extreme strain on the existing community of pilots and sensor operators,” the senators wrote.
The GAO first called attention to the drone pilot shortages and training concerns last year. The auditors said that the military attempted to resolve the shortages by hiring more instructors, but the new report shows that the instructors, too, lacked sufficient training.
Twinkies Get Back a Little Respect
You can’t keep a good junk food down.
The New York Post is reporting today that several bidders have made offers in the $2 billion range for Hostess Brands LLC, the maker of Twinkies, Ho Hos and Ding Dongs, among other gut-bloating goodies.
Hostess filed for bankruptcy in early 2012, and the snack cake part of the business was bought out of liquidation two years ago by Apollo Global Management and C. Dean Metropoulos.
Citing sources, the Post said bidders include Grupo Bimbo, Flowers Food and Aryzta AG, a Swiss company.
If Hostess does command anywhere near $2 billion, it will be a sweet day for Apollo and Metropoulos. According to the Post, they bought the Twinkies maker for $410 million.
The Easiest Way to Cut Your Home Insurance Bills
Here's a simple way to potentially cut $150 from your annual insurance expenses: Raising your homeowners’ insurance deductible from $500 to $2,000 could lower your premiums by an average of 16 percent, according to a new report by InsuranceQuotes.com. Based on the average insurance premium of $978, that works out to more than $150 a year in savings.
Of course, that lower bill comes with some caveats. First, the amount you save could vary widely depending on where you live and other factors. In the new study, the savings from a higher deductible ranged from 41 percent for North Carolina homeowners to just 4 percent in Hawaii.
Second, a higher deductible means that you would be on the hook to pay more out of pocket before your insurance coverage kicks in if something happened to your home. Before making the switch, be sure you have enough money in your emergency savings to cover the total cost of the deductible.
“Consumers need to consider the bottom line before increasing deductibles,” Laura Adams, a senior analyst with InsuranceQuotes.com said in a statement. “While switching from a $500 deductible to a $5,000 deductible sounds appealing because it lowers home insurance premiums by an average of 28 percent, it could be a risky move for consumers who don’t maintain that much in savings.”
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Increasing a deductible from $500 to $1,000 resulted in an average savings of 6 percent nationally, ranging from 25 percent in North Caorlina to a low of 1 percent in Kentucky.
As your deductible gets higher, it may become less likely that you file a claim at all, since doing so will push your premium up. A separate analysis last fall by insuranceQuotes.com found that a single claim—even if it’s denied—can hike your homeowners’ insurance by an average of 9 percent a year, which can amount to hundreds of dollars.
Looking to Buy a Home? Do This First
Buying a home is stressful enough without getting blindsided with a higher-than-expected rate on your mortgage — or outright rejection — due to a low credit score or errors on your credit report.
Even so, only half of recent home buyers said they checked their credit report early on in the homebuying process, according to a report released by Experian.
That can make for some nerve-wracked meetings with lenders. About a third of those surveyed said that their credit score surprised them, and a fifth of buyers said their score was lower than expected. Fourteen percent of homebuyers found something negative on their credit report that they didn’t know about.
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A low credit score can have costly consequences. A borrower with a FICO score of 760, for example, would pay $1,360 per month on a $300,000 loan, while a borrower with a score of 759 would pay $1,397 per month on the same loan. That difference will add up to more than $10,000 over the life of a 30-year mortgage.
Forty-five percent of future homebuyers surveyed by Experian said that they had delayed purchasing a home in order to work on their credit and qualify for better rates.
If your score is lower than expected, first check the report for errors and contact the credit bureaus about correcting them. If you’ve been dinged for a single missed payment, call your credit card company to see if it will remove the incident from your reports. Then focus on making on-time payments and paying down any high balances to get your debt-to-income ratio below 25 percent.
The New Billionaires: Younger, Self-Made, More Diverse
Quick, picture a billionaire.
Chances are you conjured up an older, white man who inherited his fortune. That stereotype was pretty accurate for the past century, but times are changing.
Cultural and economic shifts over the past decade are realigning the demographics of the world’s 1 percent, and the billionaires of the future will be self-made, younger, and more diverse, according to a new report from UBS and PwC.
Last year, two-thirds of the world’s billionaires were self-made, compared with just 43 percent of billionaires 20 years ago. The report projects that the trend toward more self-made billionaires will continue get stronger over the next 5 to 10 years, peaking at about 70 percent of the billionaire population.
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While two-thirds of current billionaires are over age 60, the average age is getting younger, thanks to both wealth transfers from the older generation and the growth of self-made billionaires.
In addition to getting younger, the report finds that billionaires are also increasingly more diverse. From 2003 to 2013, the number of female billionaires rose from 44 to 116. That’s still less than 10 percent, but it’s a number that’s growing fast.
Part of the trend toward diversity among billionaires is the explosive growth of wealth in Asia. In the first quarter of 2015, China created a new billionaire almost every week. The authors of the report expect that Asia will overtake the United States as the center of billionaire growth in the next decade.