The Dow Jones industrial average collapsed nearly 1,200 points on Monday, on a day marked by intense volatility across most financial markets worldwide. It is the largest international sell-off since 2016 amid widespread concerns about a bursting stock market bubble.
The Dow plunged even more on Monday, to 1,600 points, but bounced to 1,175 in the closing hours. Experts noted that it is the worst intraday decline in the index’s history. The developments raised more anxieties among investors and average Americans who invested their retirement savings in the stock market.
Market analysts, on the other hand, have expected a so-called “correction” following a year of enormous gains for the blue-chip index, S&P 500 index, and Nasdaq. Daniel Wiener of Adviser Investments believes the plunge had largely to do with “crowd psychology”.
Wiener explained that investors panicked over what happened Friday and started selling like crazy on Monday. However, such volatility is “healthy” for the stock market, according to Wiener.
Dow Jones Drags Down Asian Markets
Asian markets plunged Tuesday following the troubles with the U.S. trading. Japan’s Nikkei index slipped 6% on Tuesday after losing 2.5% on Monday. The Hang Seng Index in Hong Kong fell 4%, and the markets in China, Korea, and Australia didn’t fare better either.
On Monday night, Dow Jones futures lost 633 points after the market had already lost 4.9% earlier that day. Analysts estimate futures to tumble by up to 1,000 points on Tuesday morning. The record loss in futures was triggered by a two-day streak of losses in the Dow Jones. Dow’s record losses on Monday managed to erase a month’s worth of gains.
Analysts believe the turbulence may be caused by a stock market bubble that has been in the making over the last year. Last week, the Dow closed at a historic high of 26,616. Also, shareholders are now more likely to sell their assets due to a revival of the U.S. economy, which may prompt the Federal Reserve to hike interest rates very soon.
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