Amid growing concerns over the implications of a Chinese stock market meltdown as well as ongoing worries over Greece, the Dow Jones Industrial Average plummeted 200 points in morning trading.
The Dow fell 1.1 percent to 17,586, while the S&P 500 also lost 1.1 percent to 2,059. The S&P Retailing Industry Group index dropped 0.9 percent to 1,142. Meanwhile, trading was halted on the New York Stock Exchange due to a “technical glitch.”
Alibaba Group Holding Ltd. was off 2.3 percent to $77.77, which was on top of a 3 percent decline Tuesday. Kate Spade & Co. lost 2.3 percent in the morning session to $20.66 while Dillard’s Inc. declined 2.6 percent to $101.95. Other decliners included Sears Holding Corp., which fell 6.2 percent to $23.76 while Macy’s Inc. lost 2.3 percent to $66.44. Hudson’s Bay Co. was down 2.8 percent to $27.05.
The declines followed a severe drop in Asian stocks led by Chinese issues. The Shanghai Composite index fell 6 percent to 3,507 while the Hang Seng also lost 6 percent, dropping to 1,458. European stocks, however ended the day with gains based on new economic reform proposals by Greek officials.
Policymakers in China were working to mitigate a further deterioration of equities. The China Financial Futures Exchange, for example, said it would limit shorting stocks by increasing the margin requirements by 10 percentage points.
The bear market in China is occurring at a time when households have increased their participation in the equities market, but not at the same levels as other countries.
IHS Global Insight economist Brian Jackson cited the China Household Finance Survey by the Southwestern University of Finance, which showed that “during the second quarter, 8.8 percent of primarily urban households participated in the [Chinese] stock market, up from 6.1 percent in the first quarter,” Jackson said in a research note. “That confirms that a substantial number of households rushed in just as valuations were peaking, but also that the total exposure of private households in China is relatively low compared to western countries, where often a third or more participate in equity markets.”