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Investors Brace for Ugly Day on Wall Street; The Dow Down 667 Points. Aired 9:30-10a ET

Aired August 24, 2015 - 09:30   ET

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

[09:30:00] POPPY HARLOW, CNN ANCHOR: All right, the markets are open. You see the big board up there. In just a few moments we will see how this sell-off -- it looks like it's already accelerating. The Dow down 100 points at the open. We have live team coverage. CNN chief business correspondent Christine Romans, CNN Money business correspondent Alison Kosik with me here in New York. At the New York Stock Exchange, Cristina Alesci joining us. In Hong Kong, CNN Asia Pacific editor Andrew Stevens.

Cristina, to you. Futures were down more than 800 points just a few moments ago. How's it looking at the open?

CRISTINA ALESCI, CNN MONEY CORRESPONDENT: Well, that's the Dow and that is certainly a big indicator, but we're also watching the S&P 500 because that is a broader indicator of the market and it officially hit correction territory just before the market opened, Poppy, so not a good sign. A sign that those claps will probably not last very long this morning.

And what's really going on is fear and panic have taken hold. Investors watched the markets meltdown across the globe last night. And they're reacting to it. The focal point, of course, the one that everyone's talking about is China. It's a huge engine of the global growth and now there are real questions, questions about whether that's sustainable and what kind of ripple effects that will have. So that's what you're talking about what is going on in the market.

Now, on the fundamentals, investors have to be aware that as far as the U.S. economy goes, a lot of people are waking up this morning questioning what is going on with the U.S. economy. What is causing such a stark slide? Even though China may not be doing as well as everyone had hoped, why is the U.S. suffering so much? And the fundamentals on the U.S. side are there. We've seen a pretty strong jobs market, pretty strong housing market.

So what a lot of optimistic strategies are saying out there is, look, you know, the U.S. is the cleanest shirt in a pile of dark -- dirty laundry. So maybe this is just temporary. On the other hand, we have oil, which is basically a way to see the -- a way to test economic growth going forward or a metric for economic growth going forward on a global scale. That keeps sliding.

Now, that is not a great indicator because it indicates that demand for the raw material isn't as strong. And also, we cannot forget, when we talk about oil, yes, demand isn't strong, but we also have a supply glut. That's because the Middle Eastern countries keep producing. We have Iranian oil coming on the market. American producers keep pumping out oil. So there is that fundamental to keep in mind as well, Poppy.

HARLOW: Right. Right. Right. All right, Cristina, thank you. Stay with me.

I just want to have your viewers look at what you're looking at next to me. You're seeing the Dow Jones Industrial average off 800 points. It was off more than 950 points just a moment ago. To give you some perspective here as we continue our live coverage of what just broke on Wall Street, the last time the Dow Jones Industrial average was down over 700 points was October 15, 2008. And we all remember what that felt like.

Do not panic. Do not jump out of the market right now. Christine Romans here to tell us what it all means for you.

CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: OK, so this is really rare. When you see a 5 percent move in a market, in the stock market in a single day, it's very, very rare to see this. This is a lot of selling coming from all around the world.

Now, this brings you back to the level of your 401(k) probably if you have stocks in your 401(k) to about a year and a half ago. A year, year and a half ago. So that's some perspective here. The stock market has gone straight up for about six years.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Down a big -- big number.

ROMANS: Now we're down 6 percent. More than 1,000 points here. Incredibly rare. Incredibly rare to see a move that brisk. And this is something that has spread around the world from currencies, emerging market currencies tanking, commodities tanking and then suddenly this expectation, Poppy, that American stocks, U.S. stocks are inflated here.

Three ways you're going to feel this. Your 401(k) is worth a lot less today than it was yesterday. You're back to, you know, a year ago levels at least for your 401(k), but you're still up a lot from the -- from the crisis. Gas prices are probably going to continue to tank. You know, $2 a gallon is what guessing pretty quickly here because oil prices are crumbling. And all the money is coming out of the stock market and going into the bond market. What does that mean in layman's terms? It means refinance. Lock in your re-fi and buy a house!

HARLOW: Yes. Yes.

ROMANS: Home prices have been going up and mortgage rates are down.

HARLOW: And, Alison, people look at this and they're so nervous and the question is, when does it --

KOSIK: And they're saying what -- what can stop it, right?

HARLOW: Well, when does it -- also, when does it trickle into jobs? KOSIK: Right.

HARLOW: Because, yes, you've got a much stronger unemployment rate than a year ago. But when companies are nervous, they're not in a position to hire.

KOSIK: Right. When -- it's the exact reason why when you see let's say their second quarter earnings weren't so good. We're coming to the end of a second quarter earnings season. This is all about how companies are doing. And when you see reduced sales, and reduced revenue coming from China, these companies are getting nervous about what the future holds for what they're going to be taking in from -- from China. One of the -- the biggest customers for them. And that's why you're seeing investors pull out of those companies because there's a lot of negativity about what may happen in the future. You know, a lot of companies, you know, sell a lot of their goods overseas.

[09:35:12] What can stop this slide? I've been hearing, believe it or not, if the Fed comes out in one way, shape or form and says, you know what, we're not going to go ahead and raise interest rates, that could maybe calm the market a little bit.

HARLOW: But the Fed usually doesn't react to news like this.

KOSIK: Right. But one -- one way they can do is there is a Fed -- the Fed president, the Atlanta -- of the Atlanta region is speaking later today.

ROMANS: Watch him (ph).

KOSIK: Yes. And you can bet that investors are going to be listening to the speech later today and if --

ROMANS: A month ago the Fed raising interest rates is the final sign that the U.S. economy is back to normal.

HARLOW: Right. Right.

ROMANS: So a lot of people want that signal --

HARLOW: Right.

ROMANS: That, look, the U.S. is still strong. When you look at the fundamental of the American economy, home prices have been rising --

HARLOW: Right.

ROMANS: Interest rates still very, very low but they are -- are going to rise. The unemployment rate, 5.3 percent. I don't think we're there yet for a CEO to look at this and say, I'm not going to hire. I'm scaling back my hiring plans. But if this goes on for a long time, it could happen.

HARLOW: Right. All right, so now the Dow Jones Industrial average, again, let's pull up the big board as I take you live to Hong Kong looking at stocks on Wall Street. The Dow down 983 points. The last time the Dow was down 700 points was in October of 2008. We are far worse than that. It's down nearly 6 percent at the open.

Andrew Stevens live for us in Hong Kong.

Andrew, this is just building on the sell-off that we saw in Asia overnight.

ANDREW STEVENS, CNN ASIA PACIFIC EDITOR: Absolutely. But, nonetheless, it's extraordinary watching this, Poppy, seeing the level of these falls on Wall Street. And I'm finding it hard to think that this is all to do with a China manufacturing number. You get this sort of reaction. Yes, the Chinese economy is probably weaker than a lot of people thought, but it's not in recession. It's not slumping to the stage that, you know, that would justify this massive sell-off on Wall Street. I'm just curious, this may be something -- was the U.S. market that overvalued? Is this just a correct there? But you guys know that better than I do.

But just coming back to the -- to the (INAUDIBLE) side of things, yes, we've got a big, big sell-off in China today. The Shanghai composite down 8.5 percent. You've got to go back to 2007 to see that sort of fall. And what was interesting today, and what was key today, was that there was very, very little evidence of the Chinese regulators or the Central Bank in the market. They have been active in the China market, putting a floor under this falling, this tanking market.

This is a crash in China, essentially. It's down nearly 40 percent in 10 weeks. And on the way down, after we had a big, big initial sell- off, the Chinese authorities started putting money into the market, doing all sorts of very unusual measures, to try and put a floor under that. They succeeded for a whole, but today we're back in that big selling mode and no real sign of the authorities trying to --

HARLOW: Right.

STEVENS: To regulate this fall, manipulate this fall. So it suggests either that they've given up because they have no -- very little credibility left in the markets --

HARLOW: Right.

STEVENS: Or they're looking at other things, bigger things like the economy, guys.

HARLOW: Yes, and here is the thing that China does have more ammunition, does have more that regulators in the government there can do to try to stop this bleeding.

A quick break. The Dow down 823 points. This is a historic day on Wall Street that is for sure. More live team coverage straight after this.

(COMMERCIAL BREAK)

[09:43:06] HARLOW: I'm Poppy Harlow, in for Carol Costello, as we watch a sell-off on Wall Street that has frankly improved quite a bit from the open. I want to welcome our viewers, again, here in the United States and around the world as we are watching the opening on Wall Street.

Richard Quest with me, Alison Kosik, Cristina Alesci at the New York Stock Exchange, Andrew Stevens in Hong Kong, Christine Romans, chief business correspondent.

Richard Quest, to you first. This is a reaction to what we saw over -- overseas in Europe and in Asia.

RICHARD QUEST, CNN CORRESPONDENT: It's feeding itself. It's feeding on itself. Yes, yes, it's fed -- fed -- Thursday fed to Friday, Friday fed to Saturday, over the weekend, and now over Asia to Europe and Europe back here.

But let's not think -- we don't know how much selling is actually going on. This is marking down. This is a marking down at the open. A very severe, very serious, very deep thousand points as Christine said, you don't see 5 percent off a major market like the Dow very often.

But, you know, we've already come back a bit and --

HARLOW: Oh, we've come back quite a bit. We were down a thousand at the open.

KOSIK: Yes, down thousand.

ROMANS: But another perspective I would say, though, this is a 10 month low for the S&P 500. So think about, markets have gone up for six years.

QUEST: Yes.

ROMANS: You see a thousand point move almost in the morning and it's still only a 10-month low. That just shows you how quickly and aggressively markets have been going up.

HARLOW: Right.

ROMANS: And how quickly now they're coming down.

QUEST: And these aren't the markets that they used to be.

KOSIK: No.

QUEST: These are computer driven.

KOSIK: And so you're seeing the reaction of just pressing literally buttons. And that's why you saw that acceleration right when the bell rang.

QUEST: Right.

KOSIK: Now you're seeing things settle out a bit. There are cooler heads, believe it or not, are prevailing, even at 557 points lower on the down. HARLOW: Let me remind all of our viewers, just put this in context,

OK. The last time we saw the Dow down 700 points was in October of 2008. The last time it was down 600 points, August of 2011. When you look at September 2008, down 777 points.

ROMANS: It was a bad time.

HARLOW: It was a very different time.

QUEST: From lower levels. From lower levels so percentages were higher.

ROMANS: Yes.

HARLOW: Sure. So percentage wise, when we talk about percentage wise, the markets now down three and a third percent. The last time it was down 6 percent, double where we are now, was September of 2008.

[09:45:03] Cristina Alesci, I believe we have her at the New York Stock Exchange. Cristina, the sentiment on the floor, what is it?

ALESCI: There's a sense of nervousness. I mean, we see it play through into the volatility of what the numbers show right now. So you're seeing more volatility.

We haven't had this kind of volatility in a long time, and part of that is what Richard and Alison were referring to, which is this electronic trading. But once, you know, people enter into the equation, then we have to look and pay attention to what's going to happen over the next several hours. That's going to be really crucial. Investors had to digest what happened overnight with the global markets melting down.

You know, this is going to raise a lot of questions about global economic growth which was largely driven for awhile by China, right? And now investors are starting to see, you know, cracks in that, starting to question whether their economic numbers are even, you know, are even credible at this point. Alison brought up that point earlier.

But when you look at the fundamentals, it really does seem like this kind of panic doesn't really make sense in the face of U.S. economic fundamentals, which seem to be pretty strong at this point, which is why the Federal Reserve was looking to raise rates in the September/December time frame.

HARLOW: Yes, that's such an important point to keep this all in perspective, because there's a -- this is so different than 2008 in every way.

Thank you, all. Stay with me. We're going to take a quick break. On the other side, we're going to tell you what is happening to oil prices. This is a critical part of all of it. Nnext.

(COMMERCIAL BREAK) [09:51:11] HARLOW: I'm Poppy Harlow. Want to welcome our viewers again here in the United States and around the world as we watch just a huge sell-off on Wall Street. The Dow right now down 690 points, accelerating the sell-off we saw in Asia and Europe overnight. We have live team coverage. Cristina Alesci at the New York Stock Exchange, Richard Quest, Alison Kosik, Christine Romans here with me; in Hong Kong, Andrew Stevens.

Christine, to you first. Another big part of this is oil. Oil prices absolutely tanking.

ROMANS: Oil prices down another 5 percent now below $40 a barrel. It's really remarkable. It's been a crash in commodities like oil, but especially oil, and that's really dangerous for a lot of the countries that rely on oil for their own revenue, that export oil. Also tough for the energy companies that are probably in our 401(k) who have seen their stocks crash. So that's one of the reflections of what's happening in the stock market action.

Also watching oil, it's going to be good for drivers. Obviously it's good for consumers around the world. It's good for governments that consume, are net consumers of oil around the world. But such a big move in a commodity like that can be very destabilizing. So closely watching that.

For the stock market it's a psychological here -- 700 points down. That is a big psychological hit to investors at a time when the American economy has been moving forward.

HARLOW: Right, right.

ROMANS: But this is about the rest of the world, not about the U.S.

HARLOW: It's about the rest of the world, but we're increasingly dependent on the rest of the world --

ROMANS: That's right; you're right.

HARLOW: And big question marks about what the Fed here is going to do. Just to give you some context, the Dow down 700 points right now. The last time we saw this in terms of points was in October of 2008. However, it was September 2008 that the market was down 6 percent because, remember, the market was a lot lower then. And we're coming off of a six-year bull market.

And Richard Quest, many people saying this morning do not panic. This is taking a little bit off the table. This is a little bit of giveback in an extraordinary bull market.

QUEST: There are some evil winds blowing, and the question is do they become hurricanes or do they just pick peter off into the distance? At the moment, this market having down 700 -- between 600 and 800 -- it's looking for its direction. It's looking to see which -- what is --

ROMANS: Its direction is down, Richard. QUEST: No, no, the next direction. The next direction. Does it go

further down or does it rally back up again?

KOSIK: But this is more -- this is just more of a reaction, there's got to be something that --

QUEST: Exactly.

KOSIK: -- that stops it.

HARLOW: Yes, where are the fundamentals that this market is reacting to?

KOSIK: Well, and that's the thing. OK, let's talk about the U.S. economy. Although it's not great, it's not operating necessarily on all cylinders, it is the prettiest girl at the party. We're talking about better than Europe, obviously better than China. So, yes, it is a solid B. Let's give it a solid B.

So if you think about how the U.S. fundamentals are doing, many would say it would not warrant an 800 point drop in the Dow.

HARLOW: But Cristina Alesci, to you at the New York Stock Exchange, this isn't just about U.S. fundamentals. These are companies -- look across the board -- big tech companies, big auto companies from, you know, GM to HP to IBM to Apple, to you name it, these are companies that are just as reliant on the rest of the world as they are on the United States.

ALESCI: That's right. You can't really look at the U.S. in a vacuum, unfortunately, anymore. Christine brought up this point earlier, but half of the earnings of the S&P 500 companies, which is a much broader index than the Dow, half of those earnings do come from overseas. And the major concern is not what's happening today with U.S. economic data and U.S. fundamentals, but what happens a year from now, what happens two years from now. Do CEOs take a look at that and say, OK, if we have a global economic slowdown, what does that mean to my bottom line? What does it mean to how much money I can pay people and how much money I can spend on infrastructure and research?

So these are the big questions that are going to drive, you know, the market in the days and the weeks and the months going forward. And it's just too early to tell how much lower we're going to go at this point, but we need another 10 percent, maybe 7 percent to 10 percent, drop to really call it a bear market, which is a long-term switch to the downside here, Poppy.

[09:55:14] HARLOW: Yes, we're certainly not there yet. We're not even at those circuit breaker levels yet.

Cristina Alesci at the New York Stock Exchange, stay with me. Quick break. Much more of our live team coverage on just an extraordinary day on Wall Street, next.

(COMMERCIAL BREAK)

ANNOUNCER: This is CNN breaking news.

HARLOW: 10:00 Eastern, good morning, everyone. I'm Poppy Harlow in today for Carol Costello as we watch an extraordinary day unfolding on Wall Street. The Dow down 667 points half an hour into the trading session. We, of course, have live team coverage. Andrew Stevens in Hong Kong, Cristina Alesci at the New York Exchange.

[10:00:00] Here with me in New York, Richard Quest, Alison Kosik, Christine Romans. I want to begin at the New York Stock Exchange.