Fears over global slowdown hammer stocks again

New York • Growing concerns about a slowdown in China shook markets around the world on Friday, driving the U.S. stock market to its biggest drop in nearly four years.

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.

"Investors are wondering if growth isn't coming from the U.S. or China, where is it going to come from?" said Tim Courtney, chief investment officer of Exencial Wealth Advisors. "This is about growth."

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.

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.

That's unwelcome news for anyone with a 401(k) invested in stocks, but they shouldn't panic and try to time the market's swings, said Quincy Krosby, market strategist for Prudential Financial.

"The difficult thing is it's easy to get out of the market, but it's difficult to get back in," she said.

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.

"All of this is coming at a time when we haven't had a correction" in many years, Zirin said. The last time the market slipped into a correction was in October 2011.

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. Fed officials gathering next month will have to weigh the global pressures against evidence of a solid U.S. job market and improving U.S. economic growth.