Global stocks kicked off 2016 with a stumble, as a disappointing report on China’s economy rekindled concerns over slowing global growth and tempered hopes for a better year.
U.S. stocked tumbled at the open and remained lower throughout the day on the heels of a rout in European and Asian markets. The Dow fell as much as 467 points in morning trading before recovering slightly.
The blue chips fell 276.09 points, or 1.6%, to 17148.94. The decline marked the worst first day of trading since 2008, and follows the first yearly fall for the Dow since 2008. It was the seventh worst opening day in the market’s history.
The slide came after weak manufacturing data and a falling yuan triggered a 7% fall in mainland Chinese stocks, prompting authorities to halt trading (always a confidence builder) early for the day. The data showed a slowdown for Chinese manufacturers for the 10th consecutive month, and further cast doubt on China’s growth prospects and the effectiveness of Beijing’s policies of monetary and fiscal stimulus to boost growth.
Bottom line, its hard to do capitalism as a Communist country and they are seeing growing pains big time.
Deepening conflict between Iran and Saudi Arabia also lead to some fear and loathing too.
So what now?
Do nothing for now. We’ve all seen this movie before and although a rally could come at anytime, I prefer to let the dust settle. This could be a warning shot across the bow for lower prices, or it could just be an overreaction on a bad news day.
The S&P held some support late in the day, but keep in mind its violated about five moving averages in the last few trading days. So now is not the time to be a hero. Risk left the building for today.
See you in the morning.