Market recovery? Dow makes back 800 points

U.S. stocks plummeted on Monday, following a renewed rout in global markets, under severe pressure from continued fears of slowing growth in China spilling over internationally. ( Tweet This )

The major averages came sharply off lows in midday trade, with the Nasdaq off less than 1 percent. Apple reversed losses to jump more than 2 percent.

“There was sort of a lack of follow-through after the morning’s crazy action in the overall market,” said Robert Pavlik, chief market strategist at Boston Private Wealth. “The selling really dissipated once we got to around 10 o’clock.”

He attributed some of the late morning gains to a short squeeze and bargain hunting.

S&P 500 traded about 30 points lower. The index briefly lost 100 points in the open, initially joining the other major averages in correction territory before trading right on the edge.

The Dow Jones industrial average traded about 200 points lower after falling as much as 1,089 points in the open. The index traveled more than 3,000 points in down and up moves during the first 90 minutes of trade.

“Everything seems to be off the same percentage which basically means the index guys are selling out,” said Art Hogan, chief market strategist at Wunderlich Securities.

He noted that the sharp opening losses were due to great uncertainty among traders and the implementation of a rare market rule.

The New York Stock Exchange invoked Rule 48 for the Monday stock market open, Dow Jones reported.

The rule allows NYSE to open stocks without indications. “It was set up for situations like this,” Hogan said. The rule was last used in the financial crisis.

Stock index futures for several major indices fell several percentage points before the open to hit limit down levels.

Circuit breakers for the S&P 500 will halt trade when the index decreases by the following three levels: 7 percent, 13 percent, and 20 percent, from its previous close.

“Fear has taken over. The market topped out last week,” said Adam Sarhan, CEO of Sarhan Capital. “We saw important technical levels break last week. Huge shift in investor psychology.”

Read More Week ahead: Markets seek clarity from China, Fed

“The market is not falling on actual facets of a sub-prime situation. It’s falling on fear of the unload of China. That’s really behind this move,” said Peter Cardillo, chief market economist at Rockwell Global Capital.

The CBOE Volatility Index (VIX), considered the best gauge of fear in the market, traded near 37. Earlier in the session the index leaped above 50 for the first time since February 2009.

“When the VIX is this high it means there’s some panic out there,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab.

However, he said with stocks halving losses he “wouldn’t be surprised if we closed positive.” “If you could move it that far you could move it another 350 points” on the Dow,” he said.

Overseas, European stocks plunged, with the STOXX Europe 600 down more than 5 percent, while the Shanghai Composite dropped 8.5 percent, its greatest one-day drop since 2007.

Treasury yields came off session lows, with the U.S. 10-year yield at 2.03 percent and the 2-year yield at 0.59 percent.

The U.S. dollar fell more than 1.5 percent against major world currencies, with the euro near $1.16 and the yen stronger at 118 yen versus the greenback.

The Dow Jones industrial average traded down about 337 points, or 2 percent, at 16,123, with DuPont the greatest laggard and Apple and Intel the only advancers.

The S&P 500 traded down 43 points, or 2.21 percent, at 1,927, with energy leading all 10 sectors lower.

The Nasdaq Composite traded down 93 points, or 2 percent, at 4,609.

The Dow transports fell more than 2.5 percent to approach bear market territory.

About 30 stocks declined for every advancer on the New York Stock Exchange, with an exchange volume of 539 million and a composite volume of 2.1 billion as of 11:05 a.m.

Crude oil futures for October delivery fell $1.25 to $39.22 a barrel on the New York Mercantile Exchange. Gold futures for December delivery fell 30 cents to $1,159.30 an ounce in late morning trade.

Earlier, crude oil futures for October delivery fell as much as $2.70 to $37.75 a barrel, a six-and-a-half-year low.

No major economic data or earnings releases were due Monday.

Atlanta Fed President Dennis Lockhart will speak at 3:55 p.m.

CNBC’s Patti Domm contributed to this report.

On tap this week:


3:55 p.m.: Atlanta Fed President Dennis Lockhart


9 a.m.: S&P/Case-Shiller home prices, FHFA home prices

10 a.m.: New home sales, Consumer confidence

1 p.m.: $26 billion 2-year note auction


8:30 a.m.: Durable goods

9:45 a.m.: Services PMI

10 a.m.: New York Fed President Dudley on regional economy, Q&A

1 p.m.: $35 billion 5-year note auction


Jackson Hole Fed symposium begins

8:30 a.m.: Initial claims

8:30 a.m.: Real GDP Q2 (second)

10 a.m.: Pending home sales

1 p.m.: $29 billion 7-year note auction


8:30 a.m.: Personal income

10 a.m.: Consumer sentiment


12:25 p.m.: Fed Vice Chairman Stanley Fischer at Jackson Hole; topic U.S. inflation

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