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S&P Slumps as China Contagion Fears Trigger Spike in Volatility

Stock MarketsSep 20, 2021 03:23PM ET
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© Reuters.

By Yasin Ebrahim

Investing.com – The S&P 500 slipped further into the red Monday, amid a jolt of volatility that swept through the market as investors mulled the broader implications of a liquidity crisis at China Evergrande Group.

The S&P 500 fell 2.9%, the Dow Jones Industrial Average slipped 2.8%, or 966 points, the Nasdaq fell 3.4%.

China Evergrande Group, the second largest property company in China, has more than $300 billion in liabilities, and reports suggest it won’t hit an interest payment deadline on its offshore bonds due Thursday.

Failure of the Chinese property giant to make good on its debt payments could force it into bankruptcy, sparking a wider liquidity crisis in real estate sector -- a key component of the nation's economy - that some fear could trigger an economic crisis in China and severely hamper global growth.

The S&P 500 VIX Futures – Wall Street's so-called fear gauge - surged more than 30% in a sign that investors are growing nervous about the spillover of a economic crisis in China at time when Beijing has been cracking down on debt in sectors such as real estate.

“The source of the angst is ongoing worries about the broader implications of worsening developments at the beleaguered China Evergrande Group  […] reports that more companies in the property sector might be prospective targets for Beijing’s regulators,” Daiwa Capital Markets said in a note.

Fears of the potential economic crisis in China, the largest energy consumer, sent oil prices tumbling, and triggered a more than 4% drop in energy.

Devon Energy (NYSE:DVN), APA (NASDAQ:APA), Hess (NYSE:HES) led the declines to the downside in energy.

Financials, meanwhile, were dragged lower by falling bank stocks amid a slump in U.S. Treasury yields, with Citigroup (NYSE:C), Fifth Third Bancorp (NASDAQ:FITB), and SVB Financial (NASDAQ:SIVB) nursing heavy losses.

Tech also participated in the broad-based selloff as investors appeared to take a breather from the ‘buy the dip’ mentally ahead of the Federal Reserve’s two-day meeting starting Tuesday.

Google-parent Alphabet (NASDAQ:GOOGL), Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT), fell more than 3%.

Travel stocks, however, sidestepped the market malaise as airlines were boosted by easing travel restrictions.

The U.S. is set to ease travel restrictions for international visitors who are vaccinated against Covid-19 in November, the White House said Monday.

American Airlines (NASDAQ:AAL), United Airlines (NASDAQ:UAL), and Delta Air Lines (NYSE:DAL) outperformed relative to broader-market meltdown.

S&P Slumps as China Contagion Fears Trigger Spike in Volatility
 

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Comments (20)
Mark Manley
Mark Manley Sep 20, 2021 4:42PM ET
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A big thank you to all of the scared little lambs out there, I'm buying everything you're selling, did the same thing last year, thanks for the car and the beach house and the cabin, you get the idea
Mario tragik
Mario tragik Sep 20, 2021 4:33PM ET
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Pfff yeah right, until I see a +10% correction I will believe it. i have seen losses like this erased in one single day. you wont buy my shares on sale.
Pratt Man
Pratt Man Sep 20, 2021 4:01PM ET
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It was all the over priced high flyers that crushed today.  The re-open stocks actually did pretty good....BECAUSE THE ECONOMY IS FINE.
Steffen vdm
Steffen vdm Sep 20, 2021 4:00PM ET
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And the DJ almost up 400 points in last 45 minutes...
Matt Kay
Matt Kay Sep 20, 2021 4:00PM ET
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That's it. Vol collapsing, stonks rallying as predicted. Tomorrow we will be up 2% guaranteed. JPOW for prison!
Mitchel Pioneer
Mitchel Pioneer Sep 20, 2021 3:58PM ET
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300 points in losses whisked out of the system, as the US Ponzi Scheme, greatest financial fraud in history, and biggest investment JOKE in the world laughs in the face of America once again.
Pratt Man
Pratt Man Sep 20, 2021 3:58PM ET
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oops....now it's a mad dash to buy up everything.  All the put buyers are taking their loses.
Mitchel Pioneer
Mitchel Pioneer Sep 20, 2021 3:29PM ET
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Here come the knife catchers "in late trade," with another round of flagrant, predictable, criminal manipulation.  Assume the proper position America.
Pratt Man
Pratt Man Sep 20, 2021 3:29PM ET
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if you think it's all criminal manipulation, why are you posting comments on a website called "https://investing.com"?
NUNO LOUREIRO
NUNO LOUREIRO Sep 20, 2021 3:22PM ET
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The markets in China closed green, and they blame "China" for this spike in volatility.
Zelve Construction Office
Zelve Construction Office Sep 20, 2021 3:22PM ET
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green is from last week, it was banking holiday in China today..
Zate Amaterasu
Zate Amaterasu Sep 20, 2021 3:22PM ET
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-3% but ok
Matt Kay
Matt Kay Sep 20, 2021 3:20PM ET
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Another 20 days like this and we would be good. CRASH AND BURRNNNN
Mark Stallone
Mark Stallone Sep 20, 2021 3:20PM ET
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Pat, I know the answer.. Starts with a B and ends with a D.
Mark Stallone
Mark Stallone Sep 20, 2021 3:20PM ET
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Ends with a N, rather.
Deurik Correia
Deurik Correia Sep 20, 2021 2:56PM ET
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Who give ******* about china
Baris Duzalan
Baris Duzalan Sep 20, 2021 2:56PM ET
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🤘🏻
Gytis Jameson
Gytis Jameson Sep 20, 2021 2:56PM ET
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Seems to be a lot of deep pocketed investors
Stan Smith
Stan Smith Sep 20, 2021 2:55PM ET
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Phew...at least Wall St has China to blame
Pratt Man
Pratt Man Sep 20, 2021 2:40PM ET
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Good entry point right now.  Large buy orders coming in.
Ivan Ivan
Ivan Ivan Sep 20, 2021 2:40PM ET
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Blame Goldman Sachs and Morgan Stanley. That's all you need to know. They control huge assets and manipulate markets.
Kingy Yu
Kingy Yu Sep 20, 2021 2:35PM ET
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Is that a joke? All China markets closed higher.
kartik gevariya
kartik gevariya Sep 20, 2021 2:32PM ET
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market goes positive tommorow? any feedback?
Jacob Steinschlag
Jacob Steinschlag Sep 20, 2021 2:32PM ET
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I don't think so. I believe we're gonna see all red this week. China is not the issue, the issue is overextended mega caps and possible FED taper announcment
Mario tragik
Mario tragik Sep 20, 2021 2:32PM ET
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lol the fed will avoid taper even more. maybe this is all an excuse to keep injecting $ into the markets.
Jack Zhang
Jack_A Sep 20, 2021 2:30PM ET
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The bubble should be popped, but Fed may continue to stimulate.
George Orwell
George Orwell Sep 20, 2021 2:29PM ET
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Sell sell and sell. Then buy. Predictable.
Pratt Man
Pratt Man Sep 20, 2021 2:26PM ET
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Think about it for minute..."the market is worried about economic strength".  Or..."the market is worried the FED tightening because the economy is strong".  It can't be both.   The market just wants a wash out of DOWN 1000 dow points.  The economy is strong...the FED wont affect any of it.  The FED tappered last time and the market doubled.
 
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