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The U.S. stock market began Monday down sharply amid continued worries about China’s deflated currency and whether six years of bullish gains was a bubble about to burst.
The Dow Jones Industrial Average dropped more than a 1000 points, or more than five percent, in the opening hour of trading. After the sharp early morning sell-off, it recovered about 700 of those points, representing a more modest two percent loss overall in the first two hours of trading.
The rout impacted media stocks, with shares in Walt Disney dropping 1.5 percent to $97 on the New York Stock Exchange as of 11 a.m. EST. CBS was also off 1.5 percent to $44.50, Time Warner was down nearly 2 percent to just under $72 and Sony slid 5.5 percent to about $23.
On the NASDAQ, which initially fell about 400 points, or 8 percent, in early morning trading before also recovering about three-fourths of that amount, Viacom was off 1.6 percent to about $40 while 21st Century Fox slid 3.8 percent to under $27 during early morning trading. Not even investment darling Netflix was immune to the slump. Initially opening around $87, giving up more than two months of advances, Netflix is now hovering $100, off about 4 percent for the day.
Stocks in the media and entertainment sector have been sinking since Disney and others warned of slower growth for cable networks as an increasing number of U.S. consumers choose to scale back their pay TV habit, or drop it entirely. Disney started the current downhill slide in U.S. media stocks on Aug. 4 when it reined in expectations for its cable networks business, including ESPN. Other conglomerates followed with lackluster earnings and guidance, except for Time Warner.
The steep falls on Wall Street followed the Shanghai Composite index falling 8.5 percent at 3,209.91, extending last week’s losses and defying Beijing’s latest attempts to reassure investors. Local Chinese media have already dubbed the day “Black Monday,” in an echo to the stock market crash in 1987.
The opening market teased a halt to trading. The New York Stock Exchange announced it would do so if the S&P dropped 7 percent. The markets came close at more than 5 percent, but a rally — perhaps on upside speculation that the jitters could cause the federal reserve to hold off on interest rate hikes — kept everything moving.
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