Dow Jones drops 650 points, as China sell off spills over into global markets

Wall Street started the week sharply lower on Monday, with all three major indices falling more than 1.5% as investors juggled risk on multiple fronts.

The Dow Jones Industrial Average fell more than 650 points, or 1.9%, on Monday morning, its biggest drop in more than two months.

The market has been fueled by a global contagion emanating from the potential collapse of Chinese real estate giant Evergrande, heavily in debt and dangerously close to collapse as it seeks to raise funds to repay $ 300 billion in debt. .

Investors were also nervous ahead of this week’s meeting of Federal Reserve officials, who will reveal their “dot plot,” or summary of economic projections that will indicate how many voting members are considering a rate hike – and when.

The market also wants Federal Reserve Chairman Jerome Powell to signal a timeline for the withdrawal of the central bank’s “easy money” policy, a series of emergency measures that have supported the economy since. start of the Covid-19 pandemic. In his press conference after Wednesday afternoon’s meeting, Powell is expected to point to a rising inflation index, an improving unemployment landscape and recent positive manufacturing indicators as evidence of a growing economy.

Meanwhile, the scam in Washington, DC of raising the debt limit is pissing off nerves and contributing to the sell-off. In a weekend opinion piece in the Wall Street Journal, Treasury Secretary Janet Yellen warned that failure to raise the debt ceiling “would produce widespread economic catastrophe.” Within days, millions of Americans could be strapped for cash. We could see indefinite delays. in critical payments. Nearly 50 million older people could stop receiving social security checks for some time. The troops could go unpaid. Millions of families who depend on the monthly child tax credit could see delays. “

Bitcoin, crude oil, and stocks of companies such as Boeing, JPMorgan Chase and General Motors all slipped on Monday, while the Cboe volatility index, or “fear gauge,” hit its highest level since May.

Morgan Stanley strategists have warned of downside risks and a “continued correction” in the S&P 500.