The New York Times reports U.S. Stocks Dive After Rout Overseas
Stock futures, essentially what investors are betting will happen after the bell, fell so sharply that their trading had to be halted on Friday morning. The size of the declines had reached a set limit, with futures on the Dow Jones industrial average down by 550 points.
The actual declines after 9:30, while large, did not indicate an uncontrolled selling frenzy. After 10 a.m., the Dow had fallen less than 400 points. The Standard & Poor’s 500-stock index was off 4.8 percent and the Nasdaq fell about 4.6 percent.
Dismal corporate earnings and poor economic data around the world were the immediate causes for the sell-off, which sent major exchanges in Tokyo, London and Berlin down by more than 8 percent. In Japan, the Nikkei 225 index plunged 9.6 percent, hitting its lowest level since April 2003.
“There’s a lot of panic out there today,” Scott Fullman, a strategist at WJB Capital Group in New York, told The Associated Press. “People have been saying that we’re in a recession. This is the realization.”
…Adding to the pressure on markets, large hedge funds and other institutional investors have been withdrawing their money en masse to try to reduce risk and raise cash as stocks have declined — moves that have only intensified the selling.
By early afternoon trading, the FTSE 100 in London had slipped by 8 percent, the CAC 40 in Paris was down 9 percent and in Frankfurt the DAX lost 9.3 percent.
MarketWatch adds S&P 500 futures contract triggers circuit breaker
LONDON (MarketWatch) -- The Chicago Mercantile Exchange's circuit-breaker rules went into effect Friday as plunging S&P 500 and Nasdaq 100 futures contracts reached pre-specified limits.
The CME limits the S&P 500 futures to a drop of a 60 points and the Nasdaq 100 futures to a drop of 85 points during electronic action.
They can still be traded electronically, only they can't trade below those levels. Those contracts can fall more once the pits open at 9:30 a.m. Eastern. See external link on CME rules.
The declines came after wave of selling swamped equities markets in Asia and Europe. See Indications for more.
Meanwhile, the contract on the Dow Jones Industrial Average was just a fraction above its 550-point downside limit.
The New York Stock Exchange has similar rules for stocks.
The so-called circuit-breaker rules first went into effect following the 1987 market crash.
The rules call for trading halts of differing lengths in the event of declines of 10%, 20% and 30% in the Dow Jones Industrial Average, based on the average closing value of the blue-chip benchmark over the month immediately prior to the start of the current quarter.
A 1,100 point in the Dow before 2 p.m. halts trading for an hour; between 2 p.m. and 2:30 p.m., it would be 30 minutes; and it won't have an effect after that unless a "Level 2" halt of 2,200 points is reached.
The 2,200-point drop would trigger up to a two-hour halt, while a 3,350-point drop would halt trading for the rest of the day.
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