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Rally fizzles and stocks sink; Dow drops 205 points

Specialist Michael O'Mara works on the floor of

Specialist Michael O'Mara works on the floor of the New York Stock Exchange, Tuesday, Aug. 25, 2015, as stocks jumped as the market opened. Photo Credit: AP / Richard Drew

A rebound that took the Dow Jones industrial average up more than 440 points Tuesday disappeared as investors said trepidation over what will happen in China's market made holding on to stocks too risky.

At the close on Wall Street, the Dow Jones industrial average was down 205 points, about 1.3 percent, at 15,666.4. The Standard & Poor's 500 index lost 25.6 points, about 1.4 percent, to 1,867.6, and the Nasdaq composite gave up 19.8 points, about 0.4 percent, to 4,506.5.

About the same time, the price of benchmark U.S. crude oil was up 80 cents at $39.04 a barrel in trading on the New York Mercantile Exchange.

"We just saw a crazy evaporation of gains after being up the majority of the day," said analyst Stephen Carl, principal and head equity trader at Williams Capital Group. "People are nervous about the potential volatility that could erupt or resurface in the market. They're not sure what's going to happen overseas, and that uncertainty is winning out."

China's central bank Tuesday cut interest rates for the fifth time since November and lowered the amount of cash banks must set aside in an attempt to stem the country's biggest stock market rout since 1996 and a deepening economic slowdown.

"There's still some technical damage that needs to be corrected, and there's still some selling that needs to take place, which is probably why we're off intraday highs," said Terry Morris, a senior equity manager who helps oversee about $2.8 billion at Wyomissing, Pennsylvania-based National Penn Investors Trust Co. "We're not just going to slingshot back up."

Most of the selling was concentrated in the final two hours of trading. The Dow fell 4 percent from its highest intraday point. The peak-to-trough retreat matched Monday's sell-off, when concern about global growth ignited the worst sell-off in four years.


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