"Panic is a strong word," said Anthony Conroy, head trader at BNY ConvergEx, before the market open. "There's a tremendous amount of nervousness, and nervousness feeds volatility."
The Dow Jones industrial average plunged more than 500 points just after the opening bell. The losses pulled back a bit, but were still down about 400 points, or about 4.7%. The Nasdaq and S&P 500 also fell more than 4%.
As Conroy talked about investor nervousness, stock futures - which measure current index values against perceived future performance - dropped so low that they hit their lower limits before 7 a.m. ET. This prevents traders from initiating a sale below that level. Once buyers emerge, normal trading typically resumes.
"I think we've seen this coming for a while," said Conroy. Traders have "become accustomed to the volatility [in the stock markets]over the last few months," he noted.
The signs were there. The S&P 500 has dropped 38% year-to-date, with declines getting steeper over the last month. Since mid-September, the S&P 500 has plunged nearly 25%.
"In the back of everyone's mind - in the market's mind - this was bound to happen," said Ryan Larson, head of equity trading at Voyager Asset Management, who also spoke before the start of trading. "Eventually, this became a self-fulfilling prophesy. There's real fear out there."
Recession fears have gone global, with steep declines in European and Asian markets. In the latest bit of bad news, the United Kingdom said that its annual GDP rate fell 0.5% in the third quarter.
On Friday, analysts said that "everything" was selling off, including oil and gold, and there didn't appear to be any safe haven.
Larson projected that Friday trading would be "very violent." Though he added that the "major sell-off" of the morning would be alleviated somewhat when the "bottom pickers" move in.
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