Stocks sold off today, but it could've been a lot worse.
First, the scoreboard:
- Dow: 14,659.5, -139.8, -0.9 %
- S&P 500: 1,573.0, -19.3, -1.2%
- NASDAQ: 3,320.7, -36.4, -1.0%
And now, the top stories:
- The stock market spent most of the day deep in the red. At one point, the Dow was down by as much as 254 points.
- The sell-off really started in China, where the Shanghai Composite fell 5.2%, sending the index into a bear market. This was triggered by hawkish comments from the People's Bank of China, which refuses to ease up despite surging interest rates. Here's Nomura: "The guidance note stated that “overall bank liquidity conditions are at a reasonable level” and asked banks to “prudently manage liquidity risks that have resulted from rapid credit expansion”, “appropriately contain the pace of loans and bill financing” and “utilize the stock of money and credit to support the economy.”"
- However, most China economists agree that the PBoC is being prudent by being tight. In a report to clients, Standard Chartered's Stephen Green wrote that "via higher interbank rates, the PBoC is telling banks they need to source their own liquidity, reduce their reliance on [wealth management products], and not expect the PBoC to bail them out when they face a cash squeeze... Surgery is meant to cure, not kill, the patient – and while some pain is inevitable, we firmly believe the PBoC is in control."
- Meanwhile, interest rates surged with the 10 year yield surging to as high as 2.66% before slipping to 2.57%. Rates are at their highest levels since late 2011.
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