It was the largest single day decline in a year and a half, and investors are starting to panic. Overall, the Dow is now down more than 1300 points from the peak of the market.
Just yesterday, I wrote about all of the experts that are warning about a stock market crash in 2015, and after today I am sure that a lot more people will start jumping on the bandwagon.
In particular, tech stocks are getting absolutely hammered lately. The Nasdaq has fallen close to 3.5% over the past two days alone, and it has dropped below its 200-day moving average.
The Russell 2000 (a small-cap stock market index) is also now trading below its 200-day moving average.
What all of this means is that the stock market crash of 2015 has already begun.
The only question left to answer at this point is how bad it will ultimately turn out to be.
When stocks were booming, tech stocks were leading the way up.
But now that the market has turned, tech stocks are starting to lead the way down…
The Dow and the S&P 500 are negative for the year. The so-called “FANG” stocks – Facebook, Apple, Netflix, and Google – were some of the biggest losers, and helped send the Nasdaq more than 2% lower. Biotechs also suffered big losses; the iShares Nasdaq Biotechnology ETF fell 4% to a three-month low. The Vix, which gauges market expectations for near-term shifts in the S&P 500, surged more than 21%.
And Twitter is absolutely imploding. It has fallen below its IPO price, and at this point it is now down 65 percent from the peak.
Of course it was inevitable that Twitter and these tech stocks would start falling eventually. I specifically warned my readers about Twitter’s stock price nearly two years ago. I hope people listened to what I was saying and got out in time.
This current market crash is happening in the context of a full-blown global financial meltdown. Stock markets all over the planet are collapsing, and currencies are being devalued left and right. The following comes from a recent piece by Wolf Richter…
Hot money is already fleeing emerging markets. Higher rates in the US will drain more capital out of countries that need it the most. It will pressure emerging market currencies and further increase the likelihood of a debt crisis in countries whose governments, banks, and corporations borrow in a currency other than their own.
This scenario would be bad enough for the emerging economies. But now China has devalued the yuan to stimulate its exports and thus its economy at the expense of others. And one thing has become clear on Wednesday: these struggling economies that compete with China are going to protect their exports against Chinese encroachment.
Hence a currency war.
Two more major shots in the currency war were fired on Thursday by Kazakhstan and Vietnam…
Hit by sharp declines in crude prices, the oil-producing nation of Kazakhstan introduced a freely floating exchange rate for the tenge, which subsequently lost more than a quarter of its value.
The State Bank of Vietnam (SBV) devalued the dong (VND) by 1 percent against the dollar on Wednesday—its third adjustment so far this year—and simultaneously widened the trading band to 3 percent from 2 percent previously, the second increase in six days.
A quarter of its value?
Now that is a devaluation.
In the coming days, we are likely to see even more emerging markets devalue their currencies in a global “race to the bottom”. But this “race to the bottom” presents a great danger to financial markets. As I have written about previously, there are 74 trillion dollars in derivatives globally that are tied to the value of currencies. As foreign exchange rates start flying around all over the place, there are going to be financial institutions out there that are going to be losing obscene amounts of money.