An ugly sell-off quickly got less ugly.
First, the scoreboard:
- Dow: 14,671.4, -127.0, -0.8%
- S&P 500: 1,573.6, -19.2, -1.1%
- NASDAQ: 3,322.7, -34.1, -1.0%
And now, the top stories:
- Stock sold-off sharply at the open and stayed deep in the red for most of the morning. At one point, the Dow was down by as much as 254 points.
- The sell-off really started in China, where the Shanghai Composite fell 5%, sending the index into a bear market. This was triggered by hawkish comments from the People’s Bank of China, which refuses to ease up despite surging interest rates. Here’s Nomura: “The guidance note stated that “overall bank liquidity conditions are at a reasonable level” and asked banks to “prudently manage liquidity risks that have resulted from rapid credit expansion”, “appropriately contain the pace of loans and bill financing” and “utilise the stock of money and credit to support the economy.””
- However, most China economists agree that the PBoC is being prudent by being tight. “Surgery is meant to cure, not kill, the patient – and while some pain is inevitable, we firmly believe the PBoC is in control,” said Standard Charted’s Stephen Green.
- Meanwhile, interest rates surged with the 10 year yield surging to as high as 2.66% before slipping to 2.57%. Rates are at their highest levels since late 2011.
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