Dow Suffers 750 Point Crash as German Economy Teeters on Recession

Journalist:
August 14, 2019

By CCN Markets: The Dow and broader U.S. stock market plunged anew on Wednesday, erasing the previous day’s recovery after a slumping German economy raised red flags about the health of the global economic recovery.

Dow Jones in Free-Fall; S&P 500, Nasdaq Follow

All of Wall Street’s major indexes were headed for massive losses, mirroring a volatile pre-market for Dow futures. The Dow Jones Industrial Average plunged more than 750 points – nearly 3% – before a half-hearted respite reduced the nosedive to a still-grisly 656.41 points. The DJIA last traded at 25,623.5 for a session decline of 2.5%.

Dow Jones Industrial Average plunges by more than 750 points on Wednesday. | Source: Yahoo Finance.

The broad S&P 500 Index of large-cap stocks tumbled 2.45% to 2,854.55. All 11 primary sectors fell, with energy and financials each dropping more than 3%.

Plunging technology shares dragged the Nasdaq Composite Index sharply lower. The tech-laden benchmark fell 2.63% to 7,805.49.

The CBOE Volatility Index, commonly known as the VIX, was back to trading above its historic mean Wednesday. The VIX, which generally trades inversely with the S&P 500, surged 22.43% to 21.45.

German Economy Shrinks

Global equity markets were under pressure Wednesday after Germany, the world’s fourth-largest economy, experienced a mild contraction in the second quarter.

Gross domestic product (GDP) – the value of all goods and services produced in the economy – declined 0.1% between April and June, government data showed. The export-driven economy has contracted in two of the last four quarters. A technical recession is defined as back-to-back quarters of negative growth.

Europe’s biggest economy contracts for the second time in four quarters. | Source: tradingeconomics.com

Germany’s gravitational pull on the dismal euro region was apparent in the second quarter, as Eurozone GDP expanded just 0.2%.

A slumping Germany is a dire warning that global economic health is waning. The same factors that weakened Germany’s economic output – U.S.-China trade tensions, weak global auto sales, and Brexit uncertainty – are impacting other nations as well. Without a strong German economy, Eurozone contraction is likely to follow.

Click here for a real-time Dow Jones Industrial Average chart.

Sam Bourgi @hsbourgi

Financial Editor to CCN Markets, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi. Sam is based in Ontario, Canada and can be contacted at sam.bourgi@ccn.com