Dow crashes as investors look to China

The China Evergrande Group's Evergrande Center in Shanghai, China, on Wednesday, Sept.

15, 2021. Chinese authorities have told major lenders to ?? China Evergrande Group ?? not to expect interest payments due next week on bank loans, according to people familiar with the matter, taking the cash-strapped developer a step closer to one of the nation ??? s biggest debt restructurings.

Photographer: Qilai Shen / Bloomberg

(CNN Business) -

The Dow and the US stock market in general fell sharply on Monday as the debt crisis at Chinese real estate conglomerate Evergrande unsettled American investors.

Shares tumbled at the opening bell.

At noon, the S&P 500, Wall Street's broadest measure, was down 2.4%, while the Dow was down more than 820 points, or 2.4%.

The Nasdaq Composite traded a whopping 2.8% lower.

It is shaping up to be the worst day since May for the S&P and Nasdaq.

The Dow is headed for its worst day since July.

Evergrande, which is struggling to manage its massive $ 300 billion debt, was supposed to pay interest on some of its bank loans on Monday, according to Bloomberg.

The company will also have to pay interest on two of its bonds worth more than $ 100 million later this week, according to Refinitiv.

Evergrande shares fell more than 10% in Hong Kong.

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Why are global investors so concerned about something happening in the Far East?

Everything is connected in the world of financial markets and the huge amount of money loaned by Chinese companies has long been considered an imminent threat to market stability.

Now investors fear the exposure banks may have to Evergrande and similar companies.

Adding a dash of melancholy, this crisis comes on the thirteenth anniversary of the Lehman Brothers collapse.

But despite the timing, it's not certain that the Evergrande crisis will turn into a similar systemic event, according to Ryan Detrick, chief market strategist at LPL Financial.

For one thing, Evergrande has physical assets that could be sold to help pay off its debts, Detrick said.

It also expects a restructuring, rather than a default, of Evergrande's US dollar-denominated bonds.

"We think the odds are in favor of the Chinese communist government getting involved in the event of a default," Detrick said.

"They are holding on from now on, but the consequences could be too great for them to avoid intervening."

Meanwhile, it's not just contagion concerns that are pushing the market lower.

US stocks struggled to take direction last week and market analysts have long said a correction is needed after the long rally that took stocks to record highs.

"On a bear market day, it is easy to look at the closest headline like Evergrande and attach cause and effect, but this market has experienced almost no bearish volatility for a long time and a pullback was highly anticipated," he said David Bahnsen, Chief Investment Officer of The Bahnsen Group, in a note to clients.

Still, the ripples were felt throughout the market.

Bond yields fell as prices rose as investors fled to safety.

Bitcoin, another risk asset class, also felt some pain and fell 8%.

In the world of commodities, US oil prices fell 2.1%, while gold prices rose 0.2%.

CNN Business' Laura contributed to this story.

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