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Dow Jones Down 500 Points For The Day. Aired 3:30-4p ET

Aired August 21, 2015 - 15:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

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[15:30:57] POPPY HARLOW, CNN ANCHOR: I want to welcome our viewers here in the United States and around the world as we follow a huge sell-off on Wall Street. Let's take a look at the Dow Jones industrial average in the last half hour of trading on Wall Street. A sell-off of 463 points. This is by far the biggest sell-off of the year. This is the biggest sell-off wean seen for stocks since August 2011.

Let's go straight to Cristina Alesci. She joins me now at the New York stock exchange. Also with me, Richard Quest, host of "QUEST MEANS BUSINESS," and Joanne Lipman, the former managing editor of "the Wall Street Journal."

Richard Quest, to you first. The driving factors here.

RICHARD QUEST, CNN HOST, QUEST MEANS BUSINESS: The driving factors are an element of fear over what is happening in the Chinese economy. Some bad manufacturing numbers coupled with complete disbelief of the official growth numbers from China. Is China's economy basically on a downward spiral out of control? That's the first element. Then you throw into what is happening -- some weird numbers out of the United States. Factor in what the fed is going to do. Sprinkle on top of it the fact that it is the middle of August and people are away. And you end up with this very volatile trading in the last hour. We saw yesterday. I happen to think it's one of those August phenomena.

HARLOW: Joanne, I wonder if you agree that it is one of those August phenomenon. You got low volume, high volatility, but also the fed. Let's talk about the fed minutes. The notes came out from their meeting and these are the folks who decide where interest rates are going to go and it's been so important of when they are going to hike them. How big is that in this?

JOANNE LIPMAN, FORMER MANAGING EDITOR, THE WALL STREET JOURNAL: That's an issue. But look, I have to agree with Richard on this. I mean, there's two major factors that we have to consider here. One, it's August. It's a Friday in August. Lightly traded. A lot of people on vacation. So small moves get magnified, right? And second, the market at this point is really a reflection and we have to keep this in mind. It is a reflection of psychology.

At this point, people are nervous. Ever since China devalued its currency last week, people have been nervous and they are looking for things to be nervous about. This is really not a reflection of the fundamentals of the market as much of it is as the reverse psychology.

HARLOW: We've been seeing the sell-off of the Chinese markets.

QUEST: Because the Chinese market is relatively small. And the ration to the Chinese economy it's relatively unimportant. And the Chinese have been doing their best that they can to prop it up by pouring money in, by suspending shares, doing everything that in anatoma (ph) to those of us in the western market. However, you are looking at here there are about over a thousand to 1200 days, trading days, since the last (INAUDIBLE) correction.

HARLOW: A correction of 10 percent?

QUEST: Ten percent. So you're overdue a correction, but markets don't just collapse on an average Friday in August for no apparent reason.

HARLOW: Also important to note here, for the first time since 2009, now join today, oil falling below $40 a barrel. Some people say great, good for us at the gas pump. But what do you read into that and the significance here?

LIPMAN: Yes. Oil is of concern. It's one of these factors that goes into people's general nervousness about the economy and about where we are going. But again, you know, there are a lot of factors and there's a lot of nervousness in the market and we're sort of clutching at straws looking at what is the reason.

QUEST: And whenever I hear oil mentioned, which side of the coin would you like me to toss it today on the oil? Do you want it to be a bad for the economy because of the revenues from Russia and --

HARLOW: But it's a demand question. It's a concern about demand.

QUEST: But also do you want it to be a positive for all of the people on driving vacations?

HARLOW: That's a lag time in terms of how much it's going to benefit.

QUEST: It does. But you can't have your cake and eat it.

HARLOW: You can't?

In all seriousness, when we look at this, I mean, this is many times when you see a sell-off it will accelerate into the close. You got the weekend for the consumers that are watching at home and saying, my savings, my retirement, many are so quick to jump the gun and sell, sell, sell. This is not -- do not make any rash decisions here, right?

LIPMAN: Absolutely. And this goes anytime that you see a sudden move in the markets, don't make that rash decision. Yes. And you know, if you can hold on, hold on. This is not a time to panic at all. I mean, you know, we see this sort of thing happen, you know, frequently. It's cyclical and it's a measure of psychology. [15:35:18] QUEST: We're getting into the dangerous section of the day

now. We are going to that part of the day where there is books squaring, there is ETFs that close out, there are hedges that have to be balanced. So there's an enormous amount of activity, much of it -- most of it computer driven that takes place in this last 25 minutes, last ten minutes of trading. So that market could go either which way towards the close.

HARLOW: All right, Joanne, Richard, thank you. Stand by. We're going to get a quick break in here. Much more breaking news from Wall Street right after this.

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[15:40:13] HARLOW: All right, I want to welcome back our viewers here in the United States and around the world as we are 20 minutes from the close of trading on Wall Street and it's been an absolute blood bath. The Dow is down 461 points at this moment. The sell-off accelerating into the close. We have full team coverage.

Let's go first to Cristina Alesci. She join me live from the New York stock exchange. What is going on?

CHRISTINA ALESCI, CNN CORRESPONDENT: Well, Poppy, we've officially hit the point that we can call it a correction, at least the into date trading. We'll have to see where we close. Technically to call it that but at least in terms of intraday trading, we've actually hit the point where we have a correction that's a 10 percent drop from the high in the market.

Of course, all of this driven by really a global phenomenon. Emerging markets taking a beating. Asia specifically. China coming out overnight saying that it is manufacturing is taking a beating. And then you have downward pressure on oil because there are demands on -- there are concerns about demand for it around the world, really. Investors are questioning what the fed will do in this environment and no one is spared. Even the darlings of the stock market are getting hit.

The tone on the floor right now is not a typical Friday in August, I can tell you that much. People are nervous and there I hear a lot of loud noises on the floor, which is very atypical for a Friday. But just to put this into context, you know, a correction doesn't necessarily mean we're in a bear market.

HARLOW: Right. And we won't know that if we're in a bear market until after the fact.

But Cristina, there's an important and significant difference that you point out there. Is this a low volume/high volatility day in August or is it something more?

ALESCI: Look, the low volume does play a role here and that is without question. But I mean, this is a significant move, Poppy. I mean, this is big. So I -- yes. Low trading does play into the volatility. But, you know, it does amplify it but we still have a very big move.

But just to put it into context, like I said, we could have several corrections before we, actually, you know, over the next couple of months, before we actually hit a bear market. So keep that in mind. Just because we have one big or two or three big down days doesn't necessarily mean an end to the bull market that started in 2011.

And by the way, a lot of strategists out there will say this has been the most unloved bull market in history because, you know, there's been a little bit of a disconnect between what fundamentally is going on in the economy and what the stock market has done. So you have a lot of elements out there kind of looking for this kind of move in the market.

HARLOW: Absolutely. Again, the biggest sell-off we have seen in a single day on Wall Street for the Dow since August 2011.

Cristina, thank you. Stand by.

Quick break. We are going to analyze what is the psychology here, what its fundamentals, next.

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[15:47:46] HARLOW: Welcome back to our special breaking news coverage of the absolute blood bath on Wall Street. I want to welcome our viewers both here in the United States and around the world as we look at what is happening on the fourth straight day of huge losses for the markets.

The Dow Jones industrial average now off 442 points. The sell-off accelerating in the last hour as we are 13 minutes away from the close on this Friday. Is it a typical August, which is a lot of volatility and low volume or is it more?

Let's talk about it with Joanne Lipman, former managing editor of "the Wall Street Journal" and Michael Smerconish, anchor of "SMERCONISH." Thank you both for being here.

Michael, I want to get to you immediately and talk about the politics. The politics that we haven't heard a ton of this on the campaign trail and there's been a lot of fear.

MICHAEL SMERCONISH, CNN HOST, SMERCONISH: Yes. The presidential campaign thus far has been all about an email server on one side of the aisle, all about immigration on the other side of the aisle. That is about to change.

And Poppy, I don't want to equate this with the collapse of Lehman brothers, but fresh in my mind is what took place in 2008. People forget that coming out of the conventions, John McCain and Barack Obama were deadlocked and there was then a lack of confidence in McCain's capabilities soon after he said quote "the fundamentals of the economy are strong." And all of a sudden the economic issues took control of that campaign. It may happen here. We don't know really what to make of this yet, but it will certainly have political relevance.

HARLOW: Joanne, how much of this is psychology? The market is driven by psychology and we're seeing so many corporations reporting quarter after quarter of record earnings. So why this?

LIPMAN: That's right. So there's a lot of good economic indicators out there. There was good news out of Europe today out of the Eurozone today and yet we see particularly in this last half hour this panic. And what we are seeing and what we have to keep in mind is that the stock market is a reflection of psychology. It is more than a reflection of the fundamentals.

HARLOW: So for people at home --

LIPMAN: For people at home, don't panic. Don't panic. I mean, we may go into a correction territory.

HARLOW: We are officially now into correction territory.

LIPMAN: In intraday. So, you know, possibly we will go into correction territory at the close. Possibly. There are people who say that, you know, we are about time -- it's about time that we have a correction. We've had a very sustained rally. But the time to -- you want to make considered decisions. If you're an individual investor, you don't want to be jumping in there in day trading. You want to really make considered decisions about your own portfolio, whether you can want to hang on for a sustained period of time. I think you can. You know, these are all decisions to be made calmly.

HARLOW: I think a really important thing to remember here, 50 percent of Americans have no exposure to the stock market, none, not even there a 401(k) or an IRA. When you're looking at candidates and you look at OK, they have to address this. Now, they talk about this. How do they also talk to people about the impact of this, the ripple effect? If companies are nervous, they are not hiring as much and this makes them nervous.

SMERCONISH: No doubt. And this volatility reminds me of Jack Vogel, the legendary founder of the Vanguard group. This is one of those moments where Vogel says you shouldn't be opening your statements all along and you shouldn't be dissuaded from something like this.

To Joanne's point, this is to be expected in the market, maybe not to this extent, but you have to be prepared to ride out both the good and bad and not to make impulsive decisions as a result. I've got my 401(k) on the line with jack. And so I take that to heart.

HARLOW: So for the candidates, though --

SMERCONISH: I think it's challenging.

HARLOW: How do they address this to the millions who have no exposure to this?

SMERCONISH: What I described from 2008, the American people want to take a look now at the candidates and see who appears to understand the fundamentals, the basics of this? Because quite frankly, Trump has a great opportunity tonight. Poppy, it will be very interesting to see if in a stadium in Mobile, Alabama, in front of 30,000, if he addresses this sort of thing. And if he does so, with more than just a sound bite of, "I know what to do about the economy."

HARLOW: Yes, that's the question.

Joanne, how does Donald Trump, for example, best address this tonight?

LIPMAN: Well, Donald Trump I'm sure will go out there and say, as he did before the last crash, he said I was in cash long before. Who knows what he actually was? God Knows, right? But I assume he'll just go out and, you know, as Michael said, say I'm a businessman and I understand the economy. And I do think, though, for any of the candidates actually, anyone who can show that they have some grasp of the business world and the economy, this will be a plus for them.

HARLOW: This is a moment for them. You have more than Donald Trump. You got Carly Fiorina, former CEO of Hewlett Packard. You got (INAUDIBLE) with a lot of business experience.

Thank you very much, Joanne, Michael Smerconish, (INAUDIBLE) 9:00 a.m. eastern tomorrow. You won't want to miss that.

I'm Poppy Harlow in New York. Thank you for being with me as we watch the sell-off. Dow down 427 points. An ugly day on Wall Street. The closing bell just moments. Where will it end? Stay with us.

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[15:56:28] JOHN BERMAN, CNN CORRESPONDENT: Welcome to "the LEAD." I'm John Berman in for Jake Tapper today.

And we do begin with the breaking news. You are looking at it, and it doesn't look one bit good. The Dow Jones down 500 points now for the day. Three minutes away from the closing bell on Wall Street. And at this point, those three minutes can't come fast enough. It has been an awful day on Wall Street at the end of an awful week on Wall Street. Investors worried about a whole number of things, from the Chinese stock market, the Chinese economy, to oil prices in the United States. And now some beginnings to see some concerns about corporate earnings, as well.

I'm joined with me on set by our Poppy Harlow who covers business for CNN and anchors on the weekends. Also joining us right now Andy Serwer who works for Yahoo! Finance. What we're seeing right now, again just three minutes away from the closing bell. Just an awful day, Andy.

ANDY SERWER, YAHOO! FINANCE: It's a blood bath. And you know, Wall Street is always a dance between fear and greed, John. And right now we're seeing a lot of fear. You mentioned China, you mentioned oil, you mentioned corporate earnings a little soft and everyone is heading for the exits. It's a Friday. Traders historically don't like to hold positions over the weekend. HARLOW: Yes. And it is not Friday in August. And you've got really

low volume of trading, which means a lot of volatility, small movements are sort of emphasized in the markets. I think that's something to keep in mind here. Someone just -- I saw a tweet, this is not Lehman brothers. This is in word to keep this in perspective, but you are officially at least in intrity (ph) trading in correction territory. A decline of 10 percent or more. Mix in that the fed. What will the fed do? When will those interest rates go higher? Will it be September like many had thought? Will it be December? The fed has to mandate inflation, keep that in check and keep unemployment in check. Are they also looking at the market in making that decision?

BERMAN: Again, just two minutes away now from the closing bell with the Dow down more than 500 points. All the indices are down. The Asian markets as were down, way down earlier today, as for the European markets.

Again, Ed, Poppy points that correctly, no one is saying that this Lehman brothers. But Eddie, no one is saying that this is nothing either as 500 points is a lot in a day. We are now in a correction mode right now. Ten percent off of the market high. The market doesn't like something.

SERWER: Well, that's right. And there's always animal spirits at play here, John. It's a mysterious process. We didn't hear people complain too much on the way up when the stock market was headed to record highs only a few weeks ago. Let's keep that in mind.

China, continuously weakening over the past several months. And also, there's a disconnect between the Chinese economy and the Chinese stock market. The Chinese stock market flew way too high as they loosen regulation and crashed. The Chinese economy is the growth is slowing but it is OK. Our economy is in good shape.

BERMAN: It is OK, but maybe not as good as we hoped and not as trusted, I think, as they once thought either, because some of the numbers aren't so certain right now.

Poppy now, just one minute away. And in one minute we have until we listen to that gloomy bell. Talk to me about oil prices.

HARLOW: Oil prices is significant decline. Oil below 40 bucks a barrel, the first time we see this since 2009. It was inconceivable a year ago. There is two things that play here, and a big one. What the market is looking now is demand. Is there weakening demand from China, from some of these big emerging markets for oil? That matters a lot in terms of just the overall picture here. Yes, it's good for consumers at the gas pump. But the more significant part here is are companies looking for less oil to make their products.

BERMAN: Now, they're now clapping down on the exchange right now, why? Because they have to, not because they are happy. There are not many happy people down there.

Cristina Alesci is down at the market for us right now. Just ten seconds to go, Cristina. We are hearing them and we get to

it right now. There it is. The markets have closed on this day. That went bad on this week. That was bad. It will take some time for us to adjust, but right now it looks as if the Dow lost more than 500 points.