Manic Monday: Dow closes down 588 after wild ride

NEW YORK – In a historic day of turbulence, the stock market whipped between nauseating drops and roaring comebacks on Monday before closing with another big loss. Seized by fears that the Chinese economy is not as healthy as it appeared to be, investors sold with abandon at the opening bell and sent the Dow Jones industrial average down almost 1,100 points, the biggest decline on record in a trading day.

Then the market staged a dramatic comeback and almost erased its losses, coming within about 115 points of break-even. By late afternoon, stocks were sinking again — and the Dow closed down 588 points, or 3.6 percent, at 15,871. “The movements we’ve seen have been so fast and so large,” Peter Costa, the president of the trading firm Empire Executions, said on CNBC. “You’re talking about 75, 100-point moves in two minutes. It’s been extremely fast, and it’s happened very, very quickly.”

The Vix, a market reading that measures volatility and is known as the “fear index,” hit 53. The last time it was over 50 was in March 2009, when the market hit its bottom after the financial crisis.

Investors around the world are worried about China, the world’s second-largest economic power and a huge market for American products. China devalued its currency two weeks ago and has shown other signs of economic weakness.

The Standard & Poor’s 500 index, a broader reading of the market, ended down 3.9 percent, and the Nasdaq, heavy with technology companies, finished down 3.8 percent. The drop at the opening bell on the Dow amounted to 6.6 percent, so steep that the New York Stock Exchange invoked a little-known rule to prevent panic selling.

“Fear has taken over,” Adam Sarhan, CEO of the investment company Sarhan Capital, told CNBC. “The market topped out last week.”

Last week was the worst for the market in four years. The Dow entered what is known as a market correction — a 10 percent decline from its all-time high, reached in May. Then, on Monday, selling swept the globe. The Shanghai stock market closed down more than 8 percent. It has crashed almost 40 percent from its high earlier this year. The Nikkei index in Japan closed down more than 4 percent. London, Paris and Frankfurt posted similar declines.

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