Financial markets around the world took investors on a shaky ride this week.
|Traders at the New York Stock Exchange|
On Tuesday, concerns about the health of Chinese markets and the United States economy helped send investors on a flight from risk. A selloff that began on the Shanghai stock market quickly spread to Europe and the United States. Markets in Africa and Latin America also suffered losses.
China's main stock market in Shanghai fell nine percent Tuesday. It was the worst drop in Chinese stocks in ten years. Investors hurried to sell their stocks as concern spread that the government might raise interest rates. There were also unconfirmed reports of a possible new tax on capital gains. Chinese officials denied those reports.
On Wall Street, the Dow Jones Industrial Average of thirty major stocks dropped four hundred sixteen points, more than three percent. That was a loss about six billion dollars of shareholder value on the New York Stock Exchange. It was the biggest one-day drop since the first day of trading after the terrorist attacks in September of two thousand one.
But at one point Tuesday, after a month of moving up, the Dow was down as much as five hundred forty-six points.
The intense trading even overloaded the systems that continually compute the Dow Jones average. Traders had the wrong information for seventy minutes. But the Dow Jones company says it does not believe that the delay worsened the drop in the market.
Investors may have also been influenced by comments from Alan Greenspan. On Monday, the former chairman of the Federal Reserve said a recession was possible in the United States by the end of the year. Later, though, he said a recession is possible but not probable.
The current Federal Reserve chairman told Congress that the markets in the United States seemed to be working well. Ben Bernanke said the central bank still expects "moderate growth" in the economy this year. His comments Wednesday seemed to help calm the markets.
A better-than-expected manufacturing report on Thursday also helped stock prices, after an early drop on Wall Street. Another economic report had been blamed as one of the causes of Tuesday's big selloff.
On Tuesday the Commerce Department reported the biggest drop in three months in orders for durable goods in January. These are higher-priced goods designed to last three years or more, like cars and computers.
There was also concern in the markets this week about companies that deal in "subprime" home loans. These loans for people with weak credit histories have been popular in recent years. But many people are now having trouble paying them back.
All together, it was one of the worst weeks in several years for financial markets that have recently hit new highs. Investors hoped that their shaky ride was nothing more than a normal price correction.
And that's IN THE NEWS, written by Brianna Blake. I’m Steve Ember.