United States stocks drop for fifth day in a row
August 25, 2015, 4:50 pm   

In a volatile day of trading, the Dow Jones briefly plunged more than 1,000 points, then almost recovered before closing 3.6% lower at 15,871.35.The S&P 500 closed 3.9% lower at 1,893.21, putting it officially in "correction" territory - a drop of more than 10% since its peak.

The Nasdaq lost 3.8% to 4,038.6.There were no winners at all on the Dow. US bank JP Morgan was the biggest loser, dropping 5.3%.

The sharp falls were driven by ongoing fears over the health of the Chinese economy.

China`s central bank devalued the country`s currency, the yuan, two weeks ago, raising fresh concerns that a slowdown in the country`s economy was worse than originally feared.

An over-reaction?Investors` biggest worry is that firms and countries which rely on high demand from China - the world`s second largest economy and the second largest importer of both goods and commercial services - will be affected.Tech giant Apple`s shares initially plunged 13% as shareholders feared that demand for its products in China would slow.But reassurance from chief executive Tim Cook, who told CNBC journalist Jim Cramer that "strong growth" for its business had continued in July and August, reassured investors and helped the shares to recover most its losses. Apple`s shares eventually closed 2.5% lower.Analysts said US investors were over-reacting.

"Emotions got the best of investors," said Philip Blancato, chief executive at Ladenberg Thalmann Asset Management."The conjecture that the Chinese economy can propel the US economy into recession is ridiculous, when it`s twice the size of the Chinese economy and is consumer-based.

"US trader Mark Otto of J Streicher, who has worked in the industry since 1993, said the big market moves in the US were similar to the "flash crash" of 2010, when billions of dollars were wiped off some of the world`s biggest companies in a matter of minutes, only to recover almost as quickly.

"I don`t get the sense that panic is in the air right now," he told the BBC.


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