Business

Dow falls nearly 600 points in turbulent day

Stocks recovered a portion of their historic 1,000-point dive Monday, but ended on a down note as investors grew more concerned that China’s slowdown could cause a global slowdown.

The Dow Jones industrial average shed 3.6 percent of its value, or 588 points, to close at 15,871.28. The Standard & Poor’s 500 index, a broader measure of US stocks, was down nearly 4 percent, as was the Nasdaq Stock Market.

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For stock investors, it was the most jarring day since the financial meltdown in 2008, even as many professional money managers said fears about China did not warrant so drastic a downturn in US equity prices.

“It’s actually encouraging that we’re bouncing off the bottom,’’ said Lori Heinel, chief portfolio strategist for State Street Global Advisors in Boston, as stocks were rebounding. “We think the fundamentals suggest we’ve oversold here.”

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Not that they weren’t expecting a difficult day on Monday. Friday’s stock slump of more than 500 points had investors on alert Monday morning. Some had hoped China would take action over the weekend to calm the markets, but that didn’t happen. Stocks in China and Europe dove sharply overnight, sparking a negative US open.

“I’m surprised where we opened,’’ said Eddie Perkin, chief equity investment officer at Eaton Vance Management, a Boston mutual fund manager. “We’re actually looking for things to buy.”

Experts have warned of a correction after six years of a bull market, and many said Monday’s drop was driven in part by technical trading, such as a handful of exchange-traded funds that track indexes dropping by as much as 40 percent in the morning.

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“It felt a little bit like the flash crash, not human panic,’’ Perkin said.

In addition, late August is a period when many investment professionals are on summer vacation, meaning there were fewer buyers to offset the selling.

“Everything that’s happening in the market is happening on extremely low volume,’’ said Elaine Stokes, a fixed-income portfolio manager at Loomis Sayles & Co. in Boston. “We’re dead in the center of the time of year when most of the traders on Wall Street take their two-week vacations. That affects markets.”

Bond investors got a boost from the intense stock volatility of Friday and Monday, and the general outlook for bonds improved for the near term. That’s in large part because the Federal Reserve is now expected to put off even further a US interest rate hike.

Hardly anyone still thinks the Fed will raise rates in September now.

“If the markets continue to be this rattled, it would be really hard for them to come out and raise rates,’’ Stokes said.

The greater concern is the economy, not just in China but in the United States, if global growth slows down. A more volatile stock market also could spook consumers, investors said.

“If we remain weak through September, everyone’s going to open up their statement and see the value of their mutual funds,’’ Stokes said. “That could affect the US consumer who’s just getting their legs back.”

On the currency front, Lee Ferridge, head of Macro Strategy at State Street Global, said the dollar was underperforming Monday as investors assessed what slower global growth might mean. Most people seemed braced for a choppier period in the markets, even if stocks manage to shake off the worst of the China slump.

“Whilst the move itself was overoverdone, I don’t think this is the end of a longer period of downward pressure and volatility,’’ Ferridge said.

Beth Healy can be reached at beth.healy@globe.com. Follow her on Twitter @HealyBeth.
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