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T3's Take 3: US Markets Melt Down Following Implosion in China


Today's financial recap and tomorrow's financial outlook.

Today at T3 Live

T3 Live cordially invites you to our first annual Finance Festival, scheduled for November 6-8 in sunny Miami, Florida.

Scott Redler will be speaking about trading and technical analysis, and he'll be joined by a truly impressive team of Wall Street experts, including Barry Ritholz, Nicole Sherrod, Evan Lazarus, Doug Robertson, Josh Brown, JC Parets, and many more.

We've even booked a good old-fashioned bull vs. bear debate between Jeff Saut, Chief Investment Officer of Raymond James, and John Mauldin, founder of Mauldin Economics.

Read about the event here.
China's Big Dip

This week's trading started on a huge negative. About two months ago, Chinese investors were relaxing as the Shanghai Composite was posting huge gains after a mega second quarter. Fast forward to August and all those gains are gone.

And yesterday, the index experienced its worst one-day performance since 2007, losing 8.5%.

The Chinese government landmark interventions have failed to stabilize the market.

When China's markets first started to show signs of falling, the government was quick to jump in, pumping large amounts of money into the market and limiting short selling. Over the weekend, China announced one small policy change that allows pension funds managed by local governments to invest in equities. That was not exactly the move investors were hoping to hear after last week's mess, and the sell-off started.

World Equity Markets

The scare in China instilled fear into investors worldwide, with European markets opening lower. The British FTSE dropped -4.7%. The German DAX fell 4.7%, and the CAC tumbled 5.4%. The worst hit was Greece, which plummeted 10.5%.

That drop found its way into US markets.

The US dollar fell sharply against major currencies, most notably the yen, as the Fed may not raise interest rates in September given the Asian market meltdown.

Futures were down by a huge margin early this morning. The S&P 500 opened and quickly hit a low of 1867.01, good enough for an almost 13% correction off the 2134 all-time high. 

The VIX, a measure of the S&P 500's volatility, also known as the "fear index", jumped past 53 in early trade, its highest level since January 2009. It finished at nearly 40, up over 40% on the day.

The S&P 500 finished at 1893.40, down 3.9%.

Tim Cook and the SEC

Apple (AAPL) shares had a turbulent day. Just a few months ago the stock reached an all-time high of $134.54. Once fears about China started weighing in and earning disappointed, shares began to tumble. Today, shares hit a low of $92. At this point, CEO Tim Cook sent a private e-mail to CNBC's Jim Cramer, which was later publicly disseminated.

In the e-mail, Cook mentioned that iPhones activations in China have increased over the past few weeks, quelling investor fears over the impact of the Chinese economic slowdown.

Apple traded as low as $92 at the open before climbing up to close at $103.15, down 2.5%.

Tuesday's Financial Outlook

US economic data for tomorrow will include FHFA house price index, S&P case shiller reports, Markit US composite & services PMI, new home sales, consumer confidence, and Richmond Fed manufacturer.

Overseas economic data will feature German GDP & IFO business climate, and New Zealand's trade balance.

Bank of Montreal (BMO), Best Buy (BBY), Toll Brothers (TOL), and Valspar (VAL) will announce earnings before the open tomorrow.
No positions in stocks mentioned.
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