Global Markets Remain Erratic After China Worries Spark Sell-Off

Transcript

AUDIE CORNISH, HOST:

This is the kind of day when a thesaurus is handy to look up other ways to say volatile. Erratic, unsettled and capricious all work to describe this day in the market.

ARI SHAPIRO, HOST:

Stock prices took a beating. For the first time ever during a single trading day, the Dow fell more than a thousand points - 1,089, to be exact. It rebounded to close down nearly 600 points. That's 3-and-a-half percent. Just ahead, economist Austan Goolsbee takes your questions about whether to be worried or whether to buy stocks.

CORNISH: First, NPR's Jim Zarroli is on the line from New York to talk more. Welcome, Jim.

JIM ZARROLI, BYLINE: Hi.

CORNISH: So remind us exactly what happened when the market opened.

ZARROLI: It was a very scary morning, I mean, because stocks were down all over the world. They were down in Europe, especially Germany. They were down a huge amount in China, which has been, as you know, the epicenter of all the concern about the economy right now. The main Shanghai stock index fell 8-and-a-half percent. Things looked so bad that the New York Stock Exchange invoked something called Rule 48, which basically allows it to take certain steps to reduce volatility - very rarely used. But even without, the market just plunged as soon as it opened. It was the largest intraday point drop ever. Then it recovered for a while, looked like it wouldn't be such a bad day. Then in the last couple of hours, the market lost more ground. And you ended up with losses that were still pretty sizable.

CORNISH: Jim, so much of the anxiety about the economy has been tied to China, really, the last couple days, right? I mean, how are...

ZARROLI: Right.

CORNISH: ...Chinese officials reacting to the plunge in stock prices happening?

ZARROLI: Well, yeah. There's been just a lot of worry that China's economy is weaker than expected. That will hurt, for instance, companies that sell commodities and finished goods to China. China's a huge economy, so the potential for damages is huge too. And people have been waiting to see what the government would do. There was a story in The Wall Street Journal today saying China was going to flood the bank - its banking system with money, which makes it easier to borrow, which, you know, keeps Chinese companies hiring and buying and manufacturing and staying as active as possible.

There are risks to doing that. It's not clear whether this will be enough to prevent what's going on. You know, the Chinese economy - Chinese government plays a big hand in managing its economy, much more so than governments in the West do. It's been trying to intervene to keep its stock market from falling. But the results, you know - they just haven't been very successful.

CORNISH: But looking forward, how are the troubles in China likely to affect the economy here further in the United States?

ZARROLI: Well, one of the things it will do is - could do is affect interest rates. The Fed has been hinting for a long time it was going to raise interest rates sometime this year. You know, now we have this kind of shadow falling over the world economy. And that's - that could have some - a real effect on the U.S. economy. So I think some Fed officials, at least, you know, have to be looking at this and wondering what - how - whether they should change their plans, whether this is really the right time to be thinking about raising interest rates.

CORNISH: That's NPR's Jim Zarroli in New York. Jim, thank you.

ZARROLI: You're welcome. Transcript provided by NPR, Copyright NPR.