NEW YORK (AP) — The new year began on a sour note on Wall Street as stocks tumbled in a global sell-off triggered by new fears of a slowdown in China and rising tensions in the Middle East.
The Dow Jones industrial average sank 2 percent Monday, its biggest drop since September, following even sharper declines in Asia and Europe.
The steep drops served as reminder that the worries that had weighed on financial markets in 2015 — the fragile global economy and unpredictable oil prices — are not going away anytime soon.
“It’s going to be a turbulent year,” said Kevin Kelly, chief investment officer of Recon Capital Partners. “This isn’t a blip.”
The trouble started in China after weak manufacturing data in the world’s second-largest economy sent the Shanghai Composite Index plunging 6.9 percent to its lowest level in nearly three months. The drop prompted Chinese authorities to halt trading to avoid an even steeper decline.
Investors were also unnerved by heightened tensions between Saudi Arabia, a huge oil supplier, and Iran. Saudi Arabia executed a prominent Shiite cleric, prompting protesters to set fire to the Saudi Embassy in Tehran. The price of oil, a focus of much investor angst in the year just ended, gyrated wildly.
In the U.S., the Dow Jones index sank 374 points, or 2.2 percent, to 17,050 as of 2:32 p.m. Eastern time. It had fallen as much as 468 points earlier in the day.
The drop in U.S. stocks sets the market up for its worse day since Sept. 1 a gloomy start to the new year. Both the Standard and Poor’s 500 and the Dow indexes fell last year, the worst performance since the financial crisis in 2008.
The selling in China spread quickly across markets in other Asian countries, then to Europe. The DAX index in Germany, whose export-led economy is sensitive to the fortunes of China, tumbled 4.3 percent. Britain’s FTSE 100 fell 2.4 percent while France’s CAC 40 dropped 2.5 percent.
Huang Cengdong, an analyst for Sinolink Securities in Shanghai, said selling accelerated as investors tried to lock in trades before trading was halted. He expects further turmoil ahead of corporate earnings reports. “There will be heavy selling in the near future,” said Huang.
Elsewhere in Asia, Japan’s Nikkei 225 tumbled 3.1 percent and Hong Kong’s Hang Seng retreated 2.7 percent. South Korea’s Kospi closed 2.2 percent lower. Stocks in Australia, Taiwan and Southeast Asia were also lower.
In the U.S., investors were also worried about data suggesting the slow overseas growth and low oil prices that hurt U.S. manufacturers last year are continuing to weigh on them. A report from the Institute for Supply Management showed manufacturing contracted last month at the fastest pace in more than six years as factories cut jobs and new orders shrank.
The Standard & Poor’s 500 index fell 43 points, or 2.1 percent, to 2,000. The Nasdaq composite gave up 130 points, or 2.6 percent, to 4,876.
In China, the Caixin/Markit index of Chinese manufacturing, which is based on a survey of factory purchasing managers, fell in December for the 10th straight month. It was the latest sign of weakness in China to darken the outlook for Asian exporters. On Friday, an official manufacturing index also showed a persistent contraction activity despite Beijing’s stimulus measures.
The drop led stock markets in Shanghai and Shenzhen to halt trading for the remainder of Monday to avert steeper falls, the official Xinhua News Agency said. It was the first time China used the “circuit breaker” mechanism it announced late last year.
Chinese authorities have been trying for months to restore confidence in the country’s stock market after a plunge in June rattled global markets and prompted a panicked, multibillion-dollar government intervention. Beijing is gradually unwinding emergency controls that included a freeze on new stock offerings.
Escalating tensions in the Middle East briefly sent the price of oil higher. Saudi Arabia said Sunday it is severing diplomatic relations with Iran, a development that could potentially threaten oil supply.
“Oil markets will be concerned that this could be an incremental step in a deteriorating political situation that might ultimately threaten world oil supply,” Ric Spooner, chief analyst at CMC Markets, said in a commentary.
Benchmark U.S. crude gave up an early gain and fell 28 cents to close at $36.76 a barrel on the New York Mercantile Exchange. It traded over $38 a barrel earlier in the day. Brent crude, which is used to price international oils, was little changed at $37.27 a barrel in London.
Oil and gas producers, which were battered last year, were among the few stocks in the S&P 500 to rise. Consol Energy rose 61 cents, or 8 percent, to $8.51.
In other trading, some of the biggest decliners in the U.S. were companies that sharply outpaced the market last year. Amazon and Netflix, both of which more than doubled in price in 2015, were down sharply. Amazon gave up $42.64, or 6 percent, to $633.05 and Netflix sank $5.44, or 5 percent, to $108.90.
In currency trading, the dollar weakened to 119.32 yen from 120.23 yen. The euro fell to $1.0825 from $1.0858.
Bond prices rose, sending yields lower. Considered among the lowest-risk investments available, investors tend to park money in U.S. government bonds when they are fearful of weak economic growth or turbulence in stocks and other markets. The yield on the 10-year Treasury note fell to 2.23 percent from 2.27 percent.
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AP Business Writer Youkyung Lee in Seoul, South Korea and AP researcher Fu Ting in Shanghai contributed to this story.
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