Stock prices on the New York exchanges and the world markets continued to plunge on Friday making this the worst week of 2015 and biggest drop since 2011. This ends one of the longest bull runs in the history of the United States stock market. The Dow closed at 16,451, down 3.12 percent today alone. NASDAQ dropped 3 percent. The S & P also dropped over 3 percent today, closing at 1,970. Stocks are down an average 10 percent from their highs earlier this year. Wall Street is calling this a correction.
The main reason for the selloff is concerns on the part of investors over the global economy, particularly China, which is doing worse than the government likes to admit.
China’s manufacturing sector shrank at its fastest rate in more than six years in August, according to a survey from private data vendor Caixin/Markit. World markets were already on edge after China’s surprise devaluation of the yuan last week. In addition, China’s stock markets have fallen more than 30 percent since mid-year despite the fact the government suspended trading to stop the slide.
Also, oil stocks have dropped to less than $40 a barrel, 25 percent below the high this year. This is the worst week of oil price drops since 1986. The global price of oil continues to drop due to lower demand resulting from a glut in the United States, the economic slowdown in China, and over-production by OPEC countries.
Another factor is the drop in the value of Apple shares, down 21 percent from their earlier high. Other tech stocks are also sliding. Netflix has lost around $8 billion in value in the last two days, as shares crashed for the second time on Friday. Netflix is down 7.6% today in addition to the 7.8% it fell during trading yesterday.
Other media stocks began to fall Thursday and continued today. Disney and Time Warner were downgraded by analysts from Sanford C. Bernstein, who changed their rating from “outperform” to “market perform.” This is the second time recently a faltering at Disney has turned media stocks downward. Earlier this month, trouble at ESPN set off a nosedive for major media stocks. Disney ended the day down 1.2% in addition to the nearly 6% it fell yesterday, while Time Warner fell 1.6% after its previous 5% loss according to Business Insider.
The U.S. dollar fell, dropping to a two-month low against the euro. The dollar fell because the weak global economic news makes it look doubtful that the Federal Reserve will raise U.S. interest rates next month. “The Fed is in an extremely awkward situation right now,” Robbert van Batenburg, director of flow strategy at Societe Generale told Reuters. “You have across-the-board competitive currency devaluations that will invoke the deflationary monster here in the U.S.”
Thank God it’s Friday.
Corrections often happen during Bull Markets. It is too soon to know if this is a correction, a short-term adjustment, or a downward trend that could signal a Bear market. What happened on Wall Street today demonstrates how our economy is tied to the global economy. Everyone will be watching world markets Sunday night our time. This will be a good indicator what will happen on Wall Street Monday.