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Dow Jones hit by worst fall since 2008 Dow Jones stock index hit by record falls
(35 minutes later)
The Dow Jones Industrial Average has closed down by 1,175 points in the biggest one day fall since the financial crisis. The White House is "concerned" about the fall on US stock markets after the Dow Jones Industrial Average dropped by 1,175 points.
The leading US stock market index closed down 4.6% at 24,345.75.The leading US stock market index closed down 4.6% at 24,345.75.
It is the worst drop in points since September 2008 when a plan to rescue the US banking industry was rejected. The White House told CNBC: "We're always concerned when the market loses any value but we're also confident in the economy's fundamentals."
The decline extended losses on Friday, when strong wage growth data raised the prospect of accelerated interest rate rises. The fall surpasses a previous record 777.68 points drop on the Dow Jones during the financial crisis in 2008.
Monday's sell-off surpassed a 777.68 points drop on the Dow Jones on 29 September 2008 when Congress rebuffed a $700bn bank bailout plan following the collapse of US investment bank Lehman Brothers earlier that month. That came after Congress rebuffed a $700bn bank bailout plan following the collapse of investment bank Lehman Brothers.
US investors are reacting to small but significant changes in the outlook for the US economy, and what that might mean for the cost of borrowing.US investors are reacting to small but significant changes in the outlook for the US economy, and what that might mean for the cost of borrowing.
On Friday, the US Labour Department released employment numbers which showed stronger growth in wages than was anticipated. The stock market sell-off began on Friday when the US Labour Department released employment numbers which showed stronger growth in wages than was anticipated.
If salaries rise, the expectation is that people will spend more and push inflation higher.If salaries rise, the expectation is that people will spend more and push inflation higher.
To keep that under control, America's central bank will need to raise interest rates - which is what has spooked investors who were expecting the US Federal Reserve to increase rates two to three times this year. To keep that under control, America's central bank will need to raise interest rates, which is what has spooked investors who were expecting the US Federal Reserve to increase rates only two or three times this year.
They now fear there may be a few more interest rate rise. They now fear there may be a few more interest rate rises on the horizon.
The fall in share prices came as Jerome Powell was sworn in as the new chair of the US Federal Reserve and it underscores the challenge he faces - to make decisions that sustain the growth of the economy without alarming investors The fall in share prices came as Jerome Powell was sworn in as the new chair of the Federal Reserve and it underscores the challenge he faces - to make decisions that sustain the growth of the economy without alarming investors.
The decline in the Dow was closely followed by the wider S&P 500 stock index, down 3.8% and the technology-heavy Nasdaq, down 3.7%.
In London, the FTSE 100 index of leading companies also fell to close down 1.46% or 108 points lower.
The Dow's dramatic fall marks a turnaround from January, when it raced past the 25,000 and 26,000 point milestones in less than a month.The Dow's dramatic fall marks a turnaround from January, when it raced past the 25,000 and 26,000 point milestones in less than a month.
'Concerned' President Donald Trump has tweeted a number of times about the increase in US stock markets since he was elected in November 2016.
US President Donald Trump has tweeted a number of times about the increase in US stock markets since he was elected in November 2016. On 7 January, he wrote: "The Stock Market has been creating tremendous benefits for our country in the form of not only Record Setting Stock Prices, but present and future Jobs, Jobs, Jobs. Seven TRILLION dollars of value created since our big election win!"
Most recently he tweeted on 7 January: "The Stock Market has been creating tremendous benefits for our country in the form of not only Record Setting Stock Prices, but present and future Jobs, Jobs, Jobs. Seven TRILLION dollars of value created since our big election win!" Analysis: By Anthony Zurcher, BBC North America reporter
However, on Monday the White House told CNBC: "We're always concerned when the market loses any value, but we're also confident in the economy's fundamentals." Boasting about stock market gains is a dangerous game that most presidents avoid playing. Barack Obama did it occasionally, but only after the US economy had climbed significantly from the wreckage of the 2008 collapse.
After warning of a market bubble during the campaign, however, Donald Trump became the Dow Jones's biggest cheerleader- in tweets, at rallies and even during last week's State of the Union address. That set up the jarring visual of the president boasting about the benefits of his tax cuts in a speech as the markets headed south.
US cable news channels, which had been airing the president live, cut into their coverage to report on the record-setting day. It was a highly visible hiccup in the recent US economic success story that will be hard for most Americans to miss.
The president will make the case that the fundamentals in the economy are still strong. Wages are up and unemployment is down - possibly contributing to stock drop. If growth continues, this could be chalked up as yet another rhetorical mis-step by a non-politician.
If it's the beginning of a larger correction in an election year, however, the president's words could come back to haunt him.
David Madden, market analyst at CMC Markets, said: "Equity traders were enjoying a bullish run recently, and the jolt from the major decline in the US last Friday has triggered a worldwide round of profit taking."David Madden, market analyst at CMC Markets, said: "Equity traders were enjoying a bullish run recently, and the jolt from the major decline in the US last Friday has triggered a worldwide round of profit taking."
The decline in the Dow was closely followed by the wider S&P 500 stock index, down 3.8% and the technology-heavy Nasdaq, down 3.7%.
In London, the FTSE 100 index of leading companies also fell to close down 1.46% or 108 points lower.