The Dow Jones Industrial Average plunged 1,175 points, or 4.6%, making it the largest one-day drop the blue-chip index has ever seen and wiping out its gains for the year. The Dow, which tracks 30 U.S. companies, is now down 2% so far this year. The S&P 500 and NASDAQ also fell by about 4% each on Monday.
Warren Buffett was hit the hardest by the sell-off: The drop shaved $5.3 billion off his net worth in just one day. Facebook CEO Mark Zuckerberg was next in line, shedding $3.6 billion, or 4.7% of his net worth, as shares of his social media company dropped 5%. He finished the day with $73.1 billion to his name.
Amazon’s Jeff Bezos, the richest person on the planet, saw his fortune drop $3.2 billion. That erases the $3.2 billion he gained one day last week after his company announced blockbuster quarterly results. He is still worth an astounding $115.7 billion, which puts him $25 billion ahead of the second-richest person on the planet, Microsoft cofounder Bill Gates.
European markets followed Asian markets lower on Tuesday as investors continued to dump shares following the sell-off in the US. London, Frankfurt and Paris all fell sharply at the open with losses of up to 3%, before recovering some ground. Japan’s Nikkei 225 closed down 4.7%.
The sell-off was sparked last week after data in the US showed stronger wage growth, which raised expectations that US interest rates might start to rise more quickly to tackle inflation.
On Monday the FTSE 100 closed at its lowest level since April of last year.
However the falls follow some good years for investors. In 2017 the Dow in the US was up 25% and London’s FTSE 100 rose 7.6%.
Will falls turn into rout? Analysis, Elliot Bullman, Investment Advisor
The softness of markets over the last few days is down to one thing.
As monetary policy begins its long journey away from the trillions of dollars of stimulus pumped into the system to keep the economic ship from the rocks, shareholders are beginning to wonder how much of their investments are in companies with strong fundamentals.
And how much is simply holding up an asset bubble – frothy prices led ever higher in an era of ultra-low interest rates and cheap money.
Fingers are hovering over the “sell” button.
And once investors start looking at their portfolio and selling out of the froth, automatic algorithmic trading tends to “chase the dip”.
What happened in the US?
Traders returned to their desk in the aftermath of Friday’s rout to another bout of selling.
That left the Dow Jones Industrial Average index down 1,175 points, or 4.6% at the end of Monday’s session to 24,345.75.
In the short term, investors should be prepared for choppier stock markets, but doubt whether there will be a prolonged period of selling.
We have to remember that stock markets have had a very smooth ride upwards and we’ve not had a fall of more than 3% for 15 months. There’s been a real lack of volatility, which is very unusual.”
Analyst Laith Khalaf, of Hargreaves Lansdown, pointed out that, despite the heavy falls on Wall Street, the benchmark Dow Jones share index is still 20% up on where it stood this time last year.