The rout started in Asia and quickly spread to Europe, battering major markets in Germany and France. In the U.S., the selling started early and never let up. Investors ditched beaten-down oil companies, as well as Netflix, Apple and other technology darlings. Oil plunged below $40 for the first time since the financial crisis, and government bonds rallied as investors raced into hiding spots.
By the time it was over, the Standard and Poor’s 500 index had lost 5.8 percent for the week, its worst weekly slump since 2011. That leaves the main benchmark for U.S. investments 7.7 percent below its all-time high — within shooting range of what traders call a “correction,” a 10 percent drop from a peak.
Markets began falling last week after China announced a surprise devaluation of its currency, the yuan. Investors have interpreted China’s move as a sign that flagging growth in the world’s second-largest economy could be worse than government reports suggest. On Friday, they got more bad news: A private survey showed another drop in manufacturing on the mainland.
The Standard & Poor’s 500 index dropped 64.84 points, or 3.2 percent, to close at 1,970.89.
The Dow Jones industrial average fell 530.94 points, or 3.1 percent, to 16,459.75. That’s 10 percent off its high, a correction.
The Nasdaq slid 171.45 points, or 3.5 percent, to 4,706.04.
Investors pointed to other reasons behind the recent sell-off, such as falling prices for oil and other commodities as well as the relatively high prices investors pay for U.S. stocks compared with corporate earnings.
Until recently, investors seemed willing to shrug off any worrying news, confident that low interest rates from the Federal Reserve and rising corporate profits would help push stocks higher. As a result, big drops were soon followed by big gains and the market would continue on its six-year run. The S&P 500 has more than tripled in value since the financial crisis.
Roberto Perli, head of global monetary policy research at Cornerstone Macro, said the market’s recent slump likely means the Federal Reserve won’t raise its benchmark interest rate at its September meeting.
For all the markets’ jitters, many economists say they remain confident that the U.S. economy is resilient enough to withstand a slowdown in the developing world. And Europe’s economy appears to be emerging from its long slump.
Major markets in Europe finished with deep losses on Friday. France’s CAC-40 fell 3.2 percent while Germany’s DAX lost 2.9 percent. In Britain, the FTSE 100 index dropped 2.8 percent.
In Asia, the Shanghai Composite index suffered another steep drop of 4.3 percent. Japan’s Nikkei 225 lost 3 percent, South Korea’s Kospi shed 2 percent and Hong Kong’s Hang Seng fell 1.5 percent.
Back in the U.S., government bond prices rose, pushing the yield on the 10-year Treasury note down to 2.04 percent.
In the commodity markets, gold gained $6.40 to settle at $1,159.60 an ounce. Crude oil briefly dipped below $40 a barrel for the first time since March of 2009. U.S. crude fell 87 cents to close at $40.45 in New York.