Last week’s major market losses continued on Monday with the Dow Jones Industrial Average down 197 points in early trading as investors absorbed the reality that the Federal Reserve’s days of “quantitative easing” and hyper-stimulus may be coming to an end.
Investors also reacted to news that China’s central bank said Chinese banks need to curb credit-driven investment and better manage their cash.
Last week, the Dow plunged 550 points in two days resulting in the loss of $120 billion of investor capital.
Since the Dow’s May all-time high of 15,542, the Dow has dropped 6%; the S&P 500 has nosedived 7% since its all-time high of 1,687 in May.
Global markets also suffered big losses. Shanghai’s stock index took its biggest hit in four years on Monday after China’s decision to cut back on low-lending rates.
“We are starting to see that follow-through in Asia, which is all part of the broader narrative – the focus on a lack of stimulus, a creeping higher in rates and the potential impact for less liquidity globally,” Knight Capital chief market strategist Peter Kenny told Reuters.