Dow plunges more than 400 before late rally

The Dow plunged more than 400 points Monday after stocks in China fell 7 percent, triggering a halt in trading. Thanks to a late afternoon rally, the Dow closed at 17,149, down 276 points or nearly 1.6 percent.

The S&P 500 recorded a similar decline. The NASDAQ slid 2.1 percent.

Those losses followed declines in European markets, where the DAX, in Germany, had lost 4.3 percent and the London benchmark FTSE 100 dropped 2.4 percent.

The BBC reported that Asian markets fell after surveys indicated that China’s manufacturing sector showed signs of weakness. The agency also said the losses were a result of higher gold and oil prices, fueled by Saudi Arabia breaking off diplomatic ties with Iran.

The BBC said that “trading on China’s Shanghai and Shenzhen stock exchanges was halted for the first time (Monday) under new ‘circuit breaker’ rules, which are designed to curb market volatility.”

While the Chinese struggles reinforced investors’ worries about global economic growth this year, a Louisville financial planner advised that people ignore the markets’ day-to-day swings.

Stuart Coats

Stuart Coats

Already nervous investors were rattled by the bad news out of China, but for people who follow a long-term strategy, the losses should mean little to nothing, said Stuart Coats, founder and president of Coats Financial Planning.

Coats, who has worked as a financial planner for 15 years, advises that people invest in the market only those dollars that they are not going to need in the next three to five years. And, he said, people should allocate their investments to suit their goals and risk profile.

The S&P has gone up in 39 of the last 50 years, Coats said, but timing the market and predicting swings from one day to the next is tricky – and potentially costly. Last year, the S&P 500 gained 1.4 percent, but if investors had missed the three best days, they would have incurred a loss of 7.1 percent, Coats said.

“We don’t believe that trying to time the market is a good strategy,” he said. “You really should not be jumping in and out.”