The Dow is off to its worst start in a quarter century.
As China’s stock market crashed by 7% overnight and trading was halted, the Dow plunged by 320 points on Thursday before cutting its losses.
The Dow is currently down about 150 points while the S&P 500 and Nasdaq are both down about 1%.
The losses leave the Dow down 3.7% so far this year and on track for its worst four-day start to a year since 1991, according to FactSet.
“This has all the earmarks of the beginning of a significant stock market correction. Many would argue it’s the beginning of a bear market,” Tim Anderson, managing director of MND Partners, wrote in a note to clients.
China is considered the biggest threat to US stocks in 2016. Trading in China was halted on Thursday after stocks plunged by 7% in just 29 minutes, causing markets to become suspended.
China’s regulatory officials held an emergency meeting on Thursday and decided to suspend recently implemented circuit breakers, effective Friday. US stocks bounced back slightly after that news.
The country’s circuit breakers were meant to halt trading before things got too far out of hand. Regulators have quickly realized that traders were triggering the protocol as they quickly attempted to exit the market, for fear that they would miss a small window of time before market trading was suspended.
The China yuan is at its weakest level since March 2011. Currency devaluation can ultimately help boost growth, but it can hurt asset values and cause money to exit the country.
$108 billion in foreign-exchange reserves were burned through by China’s central bank in December in an effort to slow the sharp devaluation of its currency. The bank now has $3.3 trillion in cash — it’s lowest level since late 2012.
Analysts this week also voiced worries about China’s economic growth, which appears to be slowing.
Crude plunged 4% to $32.10 a barrel, the lowest level since late 2003 on news of the China stock market halt. Prices have since rebounded to $34 to remain flat on the day.
While oil prices remaining low is good news for US consumers, it hurts profits at energy companies.
The Dow isn’t the only market being hit hard by China’s decline. Stocks in Europe fell more than 2%, while Hong Kong equities plunged 3%.
Gold is up by another 1.3% to $1,106 an ounce. Gold is now trading up 4% this year. A sign that investors are putting their money into a trusted investment during uncertain economic times.