Global investors will be on edge this week to see what is in store for markets after share price falls in China last week that sent ripples around the globe.
US stocks fell on Friday, capping their worst week in more than four years, as a rapidly diminishingappetite for risk fuelled the latest leg of a global equities sell-off.
Uneasy investors opted to buy US Treasuries for their relative safety and drove bond prices higher for their best week in months.
The sell-off began on Tuesday when China's benchmark stock index fell almost 9 per cent, its sharpest drop in a decade, and that led to waves of selling on Wall Street and in stock markets around the world. For the three major US stock indexes, last week's plunge wiped out their gains for the year.
Investors' concerns included the strengthening yen and its implications for popular carry trades, in which investors borrow in low-yielding currencies and use the proceeds to invest in markets with higher returns.
And as concerns about the outlook for economic growth have taken sway, growth-oriented stock plays, including small-cap stocks and technology shares, took most of the beating.
"For the most part, traders don't want to be long anything except for the most secure assets," said Ernie Ankrim of Russell Investment. "We could have another week or two of some increased volatility."
The Dow Jones industrial average dropped 120.24 points, or 0.98 per cent, to end at 12,114.10. The Standard & Poor's 500 Index fell 16 points, or 1.14 per cent, to 1387.17. The Nasdaq Composite Index slid 36.21 points, or 1.51 per cent, to 2368.
Tech shares fared the worst, pushing the Nasdaq Composite Index down 5.9 per cent for its worst week in more than 2 years.
For the week, the Dow fell 4.2 per cent, its worst week since March 2003, and the S&P 500 lost 4.4 per cent, its worst week since January 2003.
