US stocks staged a stunning recovery off their lows on Monday, helped by a sharp turnaround in Apple's shares, but were still down about 2 percent in afternoon trading. The Dow Jones industrial average briefly slumped more than 1,000 points, its biggest point-drop ever. But by 13:05 ET, the Dow was down just 143 points, or 0.87 percent as bargain hunters stepped in.
The Dow has never lost more than 800 points in a day. The morning rout followed an 8.5 percent decline in Chinese markets, which sparked a selloff in global stocks along with oil and other commodities. Chinese stocks fell 11 percent last week raising hopes that Beijing would move again to support the market. That didn't happen. "There was some panic selling that came out of Europe and the selloff was overdone but a lot of institutional investors are seeing this as a buying opportunity," said Michael Joyce, President of JoycePayne Partners.
Apple, which slid as much as 13 percent, reversed course to trade up 1.3 percent at $107.15 by 1:30 pm ET. Apple's dramatic turnaround helped the Nasdaq composite and the S&P 500 indexes pull away from levels that would have put them into correction mode. An index is considered to be in correction when it closes 10 percent below its 52-week high. At 13:15 ET (1715 GMT) the Dow Jones industrial average was down 156.67 points, or 0.95 percent, at 16,303.08, the S&P 500 was down 22.54 points, or 1.14 percent, at 1,948.35 and the Nasdaq composite was down 25.89 points, or 0.55 percent, at 4,680.15.
Nine of the 10 major S&P 500 sectors were down, with energy and finance losing about 1.5 percent. At one point, all 30 stocks on the Dow and more than 90 percent of the S&P 500 stocks were at least 10 percent below their 52-week highs. The CBOE Volatility index, popularly known as the "fear index", jumped as much as 90 percent to 53.29, its highest since January 2009. The S&P 500 index showed 185 new 52-week lows and just two highs, while the Nasdaq recorded 589 new lows and seven highs.
"I think emotions got the best of investors," said Philip Blancato chief executive at Ladenberg Thalmann Asset Management in New York. "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 oil prices were down about 4 percent at 6-1/2-year lows, while London copper and aluminum futures hit their lowest since 2009.
Oil majors Exxon and Chevron recovered somewhat to trade down about 1.5 percent, having fallen more then 6 percent earlier. US oil and gas companies have already lost about $310 billion of market value this year. The dollar index was down 1.7 percent. It fell more than 2 percent earlier to a 7-month low as the probability of a September rate hike receded. Traders now see a 24 percent chance that the Federal Reserve will increase rates in September, down from 30 percent late on Friday and 46 percent a week earlier, according to Tullett Prebon data.
Wall Street's selloff shows investors are becoming increasingly nervous about paying high prices for stocks at a time of minimal earnings growth, tumbling energy prices, and uncertainty around a rate hike. Alibaba was down about 3 percent at $66.15, below its IPO price of $68, making it the second high-profile tech company to fall below its IPO price in the past week after Twitter on Thursday.
Futures on the Nasdaq, S&P and Dow indexes were halted briefly before the market opened after hitting a circuit breaker, a step taken by exchanges to reduce volatility and give investors time to assess information. The New York Stock Exchange invoked a rarely used rule saying market makers don't have to disseminate price indications before the opening bell in an effort to make it easier and faster to open stocks on a volatile trading day. Declining issues outnumbered advancers on the NYSE by 2,705 to 448. On the Nasdaq, 2,143 issues fell and 713 advanced.