Dow drops 588 points on turbulent day

The U.S. stock market suffered wild trading swings on Monday, with an early plunge of more than 1,000 points in the Dow Jones Industrial Average heightening fears of a downturn in the global economy.

The blue-chip index plunged immediately to open the day, before largely recovering, only to return to steep losses later in the afternoon. The Dow closed with a loss of more than 588 points.

{mosads}The volatility stirred memories of the 2008 financial crash that upended Washington and plunged the nation into recession.

White House press secretary Josh Earnest emphasized the fundamental strength of the U.S. economy, arguing that issues overseas are driving much of the volatility. He said Treasury Department officials are closely monitoring the situation in China.

The Dow wasn’t the only index to suffer convulsions, as the S&P 500 and Nasdaq went through similar drops and comebacks. The Chinese stock market, meanwhile, was battered before the open of U.S. markets, falling by more than 8 percent.

The market turmoil comes at a time when lawmakers are plunging into another round of fiscal fighting, with deadlines on government funding and the debt ceiling approaching in the fall.

Earnest used the market drama to send a shot across the bow of Congress, warning lawmakers should not add to the uncertainty.

The turmoil makes it a “particularly bad time for a self-inflicted wound,” Earnest said.

Lawmakers need to strike a funding agreement before the end of September to avoid a government shutdown, and are facing a second deadline — potentially in late October — for raising the debt ceiling to avoid a national default.

Adding to the workload, policymakers will also be trying to provide relief from sequester cuts and pass long-term legislation funding highways and other infrastructure projects.

Earnest called on Congress, to swiftly take up many of those measures after the August recess, as well as others the administration says would provide an economic boost, such as the reauthorization of the Export-Import Bank.

“We would like to see Congress take the kind of common-sense steps that builds on momentum that the economy continues to enjoy,” he said.

The near-meltdown in the markets Monday threatened to snap the years of growth in the markets under President Obama, and quickly roiled the race to succeed him in 2016.

Republican presidential candidates pointed to the drama on Wall Street to argue that the economic growth under Obama is a mirage.

Donald Trump, who is leading many polls for the Republican presidential nomination, blamed the U.S. for becoming too dependent on China economically.

“Markets are crashing – all caused by poor planning and allowing China and Asia to dictate the agenda,” tweeted the GOP frontrunner. “This could get very messy! Vote Trump.”

Carly Fiorina, who is angling for a spot in the next GOP debate, argued stocks were long overdue for a steep decline “because the underlying fundamentals of the U.S. economy are not that strong.”

She also criticized the policies of the Federal Reserve, which Republicans have long argued did more harm than good when it tried to steer the U.S. through the recession.

The stock swing even drew attention on the Democratic side of the 2016 race, with Sen. Bernie Sanders (I-Vt.) using the downturn to bash the nation’s banks.

“We need banks that invest in the job-creating economy,” tweeted the liberal candidate. “We don’t need more speculation with the American economy hanging in the balance.”

Monday’s stock drop presents a stiff challenge for the Federal Reserve, which is just weeks away from a policy meeting where many have expected the bank to raise rates for the first time since the financial crisis in 2008.

Observers now say the Fed could be forced to put those plans on hold and stick with near-zero borrowing costs. Barclays announced Monday that it was pushing back its expectation for the next rate hike from September to March 2016.

Lawrence Summers, a former economic adviser to Obama and Treasury Secretary under President Clinton, said Monday it was an open question what the Fed does next.

“It is far from clear that the next Fed move will be a tightening,” he tweeted. “As in August 1997, 1998, 2007 and 2008 we could be in the early stage of a very serious situation.”

Summers was Obama’s preferred pick to lead the Fed after Ben Bernanke stepped down at the beginning of 2014. But a liberal uprising thwarted his nomination, ultimately leading the president to select Janet Yellen.

— This story was last updated at 4:29 p.m.