Stocks plummet on Wall St. following volatility in Chinese Markets

SAN FRANCISCO (KTVU and AP) - China took action Friday in a desperate attempt to calm the wild volatility that twice triggered a shutdown of the Chinese stock market and sent shockwaves worldwide in the first week of the New Year. The Shanghai market closed up 1.5% percent Friday after plummeting 7% the day before.

It brought some relief for U.S. investors who watched the Dow open Friday after the worst four-day start to a year in the market's history.

Financial experts say fears took hold Thursday that China's economy is weakening. Another factor was the decreased value of Chinese currency, the yuan, which dropped to a five year low Thursday.

"That unsettled the market as well. That was taken as a sign that the authorities are concerned about the weakness in the Chinese economy," said Gary Schlossberg, a senior economist with Wells Fargo Asset Management in San Francisco.

Also troubling for some, was the plummeting price of oil which dropped below $32 a barrel Thursday, over worries that a slowdown in China could weaken demand.

The drop in markets worldwide could be felt on the streets of San Francisco, where digital tickers had investors seeing red.

"Bad news to start off the New Year," said Amy Gramlich of Napa, "I kind of worry because I have stocks where I work."

"I think checking your stocks every day is probably the best way to be an unhappy person these days," said Robert Ritchie of Berkeley with a wry smile.

For U.S. investors the Dow's 900-point drop in the first four days of trading in 2016 is hard to watch.

"Right now, I'm kind of not looking. I work for a startup so right now and we just went IPO," said Kevin Abercrombie of San Francisco.

Experts say there are important lessons for investors.

"You shouldn't react on emotion and go back and just make sure that whatever your goals and needs are for the assets that the investments are aligned to that," said Melissa Gibson, a TD Ameritrade Investment Consultant.

"It's also a test of just how much risk you're willing to take on. how much you're accepting of volatility," said Schlossberg.

The downturn in the U.S. has been concentrated in technology stocks, which could suffer if demand for iPhones and other electronics weakens. Apple sank 4 percent and has now fallen 27 percent since July.

The market downturn also came as sources said tech giant Yahoo plans to eliminate more than 1,000 employees or 10% of its workforce, in the face of mounting pressure to turn its business around. Yahoo has already cut its staff by 14% over the past year.

The tech-heavy Nasdaq composite index fell six consecutive days and entered what economists call a correction, which is a 10% drop from a recent peak.

So far, the Nasdaq is the only major U.S. index to enter a correction, but the Dow is down 9.8%from its peak in May, and the S&P 500 has lost 8.8% since then.