The U.S. Stock market plunged on Friday with the Dow Jones industrial average decreased more than 500 points, the S&P 500 index dropped to lowest point since Aug. 24 and oil prices slumped further below the $30 per barrel. Stock market had opened dramatically lower after Chinese stock market tumbled, increase concerns about global recession is underway which could slow down the U.S. economy.
“It’s really been a shoot-first, ask-questions-later kind of market,” said Andy Brooks, head of U.S. equity trading at T. Rowe Price, saying that worry about China and concerns about the oil price are pushing the stock market become more volatility.
The Stoxx Europe 600 decreased 3.1%, dragged lower by energy and mining firms as Brent crude oil decreased below $30 a barrel.
Asian stock markets closed lower after China’s Shanghai Composite Index dropping 3.6% to enter bear-market territory.
“While we expected to have more volatility in 2016, I certainly did not expect the year to start with this big of a downdraft,” said Kate Warne, investment strategist at retail brokerage Edward Jones. “The same issues that plagued stocks in 2015 are persisting this year, including worries about China and a steep drop in the price of oil.”
The latest crushed in China’s stock market followed an official media report that some Chinese banks were stop accepting stocks as collateral for loans. And official data showed weak demand for bank loans at the same time.
In another party, U.S. crude-oil slumped blew the $30 per barrel Friday. Oil prices have lost approximately 20% this year amid concerns that the onset of Iranian exports after sanctions are cancelled could add to the glut of supply, the worry about Chinese demand have also added to the pressure on oil prices.
The slumped on Friday came after Wall Street had its biggest one-day gain of the year on Thursday, while investors start to buy up hard-hit corners of the market after a bruise begin 2016.
“Everyone is focused on China volatility and energy volatility, and that’s swamping the larger story,” said Dennis Mitchell, senior portfolio manager at Sprott Asset Management.
Mr. Mitchell said he forecast the fourth quarter earnings season would indicate weakness for energy companies and multinationals. However, he believes markets will recover their composure later this year as oil prices find a floor, and people realize that China will not implode.