Under the combination of various factors, US stocks once again ushered in “Black Monday”, and investors also witnessed the history of the second circuit breaker.

Editor’s note: This article is from the micro-channel public number “hard core Kanban” (ID: wangyih5) , Author: Kanban Mother.

Netease News Boiling Point Studio and Inspur Studio have created a short video column “Hardcore Kanban”. The first video will take you through the entire process of US stock fuse. The following is the text:

2020 is a very magical year. This is just the beginning. World-class events that most young people have never experienced have happened one after another.

At 21:34 on March 9, Beijing time, US stocks plunged 7% at the opening, creating the largest one-day drop since December 2008.

3 trillion US dollars fly instantly Smoke out.

What is this concept?

3 trillion US dollars, equivalent to a full year of California’s GDP.

A different metaphor, Alipay sets up five billion yuan each year, and US $ 3 trillion is enough for Alipay to play for more than 40,000 years.

Because the single day fell too badly, the fuse mechanism was triggered directly, and the US stock market suspended trading for 15 minutes.

What does fusing mean?

This word is actually quite vivid. In the past, fuses were made of thin metal wires. In order to prevent short circuits, the house was spotted. When the current is too strong, the fuse will “blown.”

A simple understanding is a self-protection mechanism.

The so-called fuse mechanism of the stock market means that the entire stock market has collapsed too much.

Everyone is selling stocks and has reached a point where they have to suspend trading and calm everyone down.

This time, it is the first time that US stocks have melted in the past 23 years.

So, to what extent has the U.S. stock market melted in 23 years? Where does the fusing mechanism come from? What’s the cause of this blowout?

The first video of the hardcore Kanban, I want to show you about the stock market that is closely related to our lives.

The whole process of the three trillion US dollars fly-off is telling you what is witness history

Someone has to ask, why should I know the stock market? It has nothing to do with me.

But in reality, the stock market runs through every aspect of our lives. Almost all new trends are formed in the stock market first.

Speaking back to the question, this time the US stocks melted down. The 7% plunge on March 9 was only a one-day drop. Compared with February 19, the US stocks have fallen by nearly 20%.

The bull market that started 11 years ago has made many people make a lot of money, but the bear market is late but late.

It is said that no one wants mobile phones everywhere on Wall Street, because their owners are all lined up on the rooftop.

For example, if an ordinary person invests 1 million of his hard work into the stock market, then on March 9th, based on the overall decline, 70,000 of them have drifted with the wind. Not to mention the particularly tough stocks that fell.

Wealth has shrunk overnight. If it were you, would you be uncomfortable?

This did not happen suddenly.

The arrival of the nightmare is early.

In the first two weeks of February 2020, the Dow Jones Index was off to a good start, with gains of 3% and 1.02%, respectively.

When it comes to proper nouns, we must first explain it. it’s actually really easy.

The Dow Jones Index, referred to as the Dow, generally refers to the Dow Jones Industrial Average (DJIA), which is the sum of the share prices of the 30 largest and most well-known listed companies in the United States.

Famous companies like Apple, Microsoft, Goldman Sachs are among these thirty.

Although the Dow only involves the stock price of 30 companies, it is often regarded as the most sensitive index to reflect changes in the US stock market, which has played a significant role in investors’ observation of market dynamics.

I just said that the Dow opened in February, but the good times are not long. From the third week on, the Dow ushered in a domino-like forward move.

The last week at the end of February plummeted 12%, the worst weekly performance since the financial crisis.

Starting in March, the Dow first rebounded briefly, rising 1.79%; however, the subsequent downward momentum was even more intense, and it fell 7.79% from the next Monday.

At the same time, except for the 30 most well-known companies whose stock prices have fluctuated greatly, the S & P 500 Index, which records the stock price fluctuations of 500 US listed companies, has a similar trend.

Compared with the Dow Jones Index, the S & P 500 Index contains more companies and can reflect broader market changes.

As of March 9, the S & P index has fallen 12%, the largest decline in nine years.

This plunge has wiped out about $ 3 trillion in wealth.

The fuse has only happened twice in 23 years.

A shares broke out on January 5, 2016. The actual transaction time was 2 hours and 19 minutes. A total of 4.24 trillion yuan was melted out, and 508 million yuan was evaporated per second.

I thought that only A shares were blown. Why are there US stocks?

The whole process of the three trillion US dollars fly-off, tell you what is witnessing history

It all starts with Black Monday in 1987.

Friday, October 16, 1987, the U.S. stock market plummeted 5%.

As a result of the panic sell-off on the following Monday, global stock markets ushered in the largest single-day drop in history at that time.

In the United States, the Dow fell 508 points on the day, a drop of more than 20%.

In the month, eight of the world’s twenty-three major markets fell by 20% to 29%, three by 30% to 39%, and three by more than 40%.

Among them, on the Black Monday, the Hang Seng Index, which reflects the level of Hong Kong stock prices, fell by more than 400 points, triggering a historic four-day suspension.

In order to avoid similar stock disasters in the future, the New York Stock Exchange launched a fuse mechanism three months after the “Black Monday”, that is, February 1988, and it was officially implemented in October 1988 .

The triggering conditions of the fuse mechanism have also been adjusted several times.

In January 1997, the Brady Commission, then responsible for studying the market mechanism, expanded the scope of the fusing mechanism based on research:

  • When the Dow fell 350 points, market trading was suspended for half an hour;

  • After resuming trading, if the Dow drops 200 points again, market trading will be suspended for another hour.

    If the second blowout occurs within the last hour of the trading session, the trading market can be closed earlier in the day.

    Unexpectedly, not long after the new rules were set, there was a huge test.

    On October 27, 1997, three months after the East Asian financial crisis, the US stock market suffered its first meltdown in history.

    On the day, the Dow fell 554 points, once again creating the largest single-day drop in history.

    For the first and only time in history, the NYSE is in Eastern TimeThe trading floor was closed before 4 noon.

    However, the triggering criteria of this fusing mechanism was immediately questioned.

    Many people believe that with the development of the stock market, market prices have risen a lot, and the points that the Dow has fallen have not been able to fully reflect market fluctuations.

    So, starting from April 1998, the triggering rule of the fusing mechanism was changed to the percentage drop of the Dow, using the quarterly value as the comparison standard.

    At the same time, the fusing mechanism has also been increased from the previous two levels to three levels, and the timing of the occurrence is also more detailed.

    Until February 2013, the fusing rules were revised again, and a three-level S & P index was added as a measure.

    The first level of fusing is the S & P index falling 7% from the previous trading day, and the second level is down 13%.

    If it occurs between 9:30 am-3:25 pm EST, the market will suspend trading for 15 minutes.

    If it happens after 3:25 pm, there will be no pause.

    The third level fuse is down 20%, then all stock trading on that day will be terminated.

    To outsiders, this kind of rule may have been exhausted.

    This US stock market meltdown was triggered in accordance with the new rules set in 2013, which is equivalent to cutting the color of this new standard.

    The whole process of the three trillion US dollars fly-off, tell you what is witness history

    What caused the US stock market to blow out this time?

    Stock market volatility is often due to anomalies in the economy and society.

    An important factor in this crisis is the plunge in crude oil prices.

    This starts with a tumultuous talks between Saudi Arabia and Russia.

    On March 6, 2020, Saudi Arabia, as a major member of the Organization of Petroleum Exporting Countries, that is, a member of OPEC, proposed to reduce production.

    Due to the spread of the new coronavirus, global crude oil demand has declined. In this way, Saudi Arabia wants to reduce the losses caused by excess oil extraction.

    However, Russia has refused to cut production.

    As early as 2018, Bloomberg reported that Russia and Saudi Arabia had differences on how to allocate production cuts.

    This negotiation has even provoked the fighting nations.

    Russian thinking, on oil production, I originally PK, but Saudi Arabia, if I reduce production, my market share will drop, why?

    Saudi Arabia, okay, since you don’t agree, give you some colors to see.

    Saudi Arabia then launched an oil price war on March 7 to significantly reduce crude oil pricing and further increase crude oil output in an attempt to defeat Russia.

    In the past, Saudi Arabia produced approximately 9.7 million barrels of oil per day.

    However, figures from the Energy Agency show that Saudi Arabia can increase production by another 2 million barrels per day, while other OPEC members Kuwait, Iraq and the United Arab Emirates can increase by 1 million barrels per day.

    Obviously, Saudi Arabia ’s goal is only Russia, but the shock caused by the decline in oil prices is global.

    Take the United States as an example. If the price war between Saudi Arabia and Russia lasts for more than a few weeks, many small oil companies responsible for more than 15% of US oil production will face bankruptcy.

    Large oil companies will also face severe challenges.

    The shock caused by oil prices is even more pronounced in the stock market.

    On March 9, in the United States, the 10 worst performing stocks in the S & P index were all oil producers, and all stocks fell more than 30%.

    Among them, the shares of Marathon Oil and Apache Corporation fell more than 40%.

    In other countries, Saudi Aramco ’s shares have fallen 10%, the largest decline allowed by the country ’s stock exchange;

    • Royal Dutch Shell dropped about 17%;

    • British BP and French Total also fell.

      Obviously, the direct cause of the stock market shock is the plunge in oil prices.

      In addition to oil, the global outbreak of the new crown virus also added a fierce fire to this fuse.

      The closure of factories, airports, shops, schools, and even the closure of entire cities has filled the global economy with uncertainty.

      After the outbreak, isolation and control measures in various countries have restricted the circulation of production factors such as labor and raw materials, which has greatly affected the normal operation of global trade.

      In short, under the influence of the epidemic, the global economy is shrinking.

      Uncertainty breeds fear, and fear breeds panic.

      A series of measures after the spread of the new crown have quickly raised investors’ risk aversion. Panic selling is continuing. The Fed’s emergency policy also failed to stop the stock market from falling and falling.

      In addition to the two main factors of oil and the epidemic, the bubble economy and other problems that have always existed are also behind the scenes of this fusing.

      • Long-term technological progress and excessive monetary and fiscal policies have caused overcapacity;

      • The continuous advancement of medical technology has made the global ageing deeper;

      • The problem of income imbalances between countries is also increasing.

        This combination of reasons has caused the current sluggish global demand.

        Insufficient global demand results in a lack of momentum for economic growth, and the corresponding hidden crisis in the stock market.

        Under the combination of various factors, US stocks once again ushered in “Black Monday”, and investors also witnessed the history of the second circuit breaker.

        After the US stock market melts down, the stock market may enter a bear market. Bear markets are uncommon, but are often a foretaste of difficult economic times.

        The whole process of the three trillion US dollars fly-off is telling you what is witness history

        After the gunshot, there is no winner.

        Global cooperation is the only way to overcome difficulties and maintain the stability of the energy market.

        A public health crisis has evolved into a global stock market shock.

        This fusing has deepened our understanding of the lethality of the virus.

        Humans are still small in the presence of viruses.

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