Monday, January 4, 2016

TELL THE NEWS

If increased market volatility worried investors going into 2016, they didn't have to wait long to realize some of that fear as China set the tone on the first real trading day for many, selling off dramatically overnight when officials there stopped trading to halt the carnage.

In what's called a "circuit breaker," there's never a lack of imagination when it comes to markets, Chinese authorities tossed cold water on the selloff and it didn't take longs, to use the words of a classic rock and roll song, for Beethoven to roll over and tell Tchaikovsky the news.

In market parlance that's called correlation.

Here's an account from marketwatch.com/story/us-stocks-set-for-tumble-at-open-as-china-fears-return-2016-01-04

The Dow Jones Industrial Average plunged about 400 points in early trade Monday as a 7% drop in Chinese stocks stoked a global selloff in stocks.
The Dow DJIA, -2.22%  plunged nearly 411 points to 17,015, led by a drop in DuPont Inc. DD, -3.83%  and American Express Co. AXP, -3.13%
The S&P 500 SPX, -2.12%  fell about 45 points to 1,998, led by a decline in technology stocks, financials and industrials. Only the S&P 500’s energy sector showed a modest gain as Middle Eastern tensions helped lift crude-oil prices.
The S&P 500-tracking “SPY” ETF opened down nearly 2%. According to Bespoke Investment Group analysts, since the SPY SPY, -2.03%  began trading in 1994, the ETF has only opened lower on the first trading day of the year twice in 22 years, and it has never opened lower by more than 1%.
Meanwhile, the Nasdaq Composite COMP, -2.75%  cratered by 138 points at 4,869 as tech stocks took the brunt of Monday’s tumble.
China slump: The sharp losses followed an almost 7% slide in China’s Shanghai Composite Index SHCOMP, -6.86%  on the back of a weak manufacturing reading. The slide activated a new circuit-breaker system for Chinese stocks,halting trading on the mainland for the rest of the day. European stocks also slumped.
“The rout in China is placing pressure on markets more globally, although it remains to be seen how long the hit to market sentiment will persist,” said economists at Investec in a note.
Last summer, a severe selloff in China’s stock market sparked a global market rout, which was seen as one of the reasons the U.S. Federal Reserve kept rates on hold at its September meeting.
Chinese officials announced plans for the circuit breaker system in December, as a measure to prevent the wild swings that accelerated this summer’s stock-market crash. But analysts and investors say the circuit breaker could trigger more selling, as the freeze spooks investors and losses snowball, setting off the halt all over again.

There's an old metaphysical notion: be careful what you're fearful about.

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