What's Going On in Global Markets: An Explainer

PHOTO: A woman reacts near a display board showing the plunge in the Shanghai Composite Index at a brokerage in Beijing, Jan. 7, 2016. PlayNg Han Guan/AP Photo
WATCH Stock Market in a Free Fall

Chinese stocks have been selling off this week and overnight China's stock markets crashed again, dropping 7 percent. Trading ultimately had to be halted after just 30 minutes.

Interested in ?

Add as an interest to stay up to date on the latest news, video, and analysis from ABC News.
Add Interest

That’s had a ripple effect on U.S. stocks, which have also been dropping, but not by nearly as much.

Regulators in China said they will suspend circuit breakers after an emergency meeting today. The announcement helped U.S. markets rebound, cutting the morning's losses in half.

The Dow Jones Industrial Average is now down 150 points, up from 300 points earlier today.

What exactly do China's changes mean?

Circuit breakers are like tripwires – when stocks fall by a certain amount, they automatically kick in and halt trading. They keep panic sellers from dumping everything in their portfolio and sending the market crashing even further.

But they also keep out would-be buyers, who look at sell-offs as opportunities to buy stocks (those buyers, in Wall Street speak, “buy the dips”).

The only way to turn a sell-off into a rebound is for buyers to come in and send stocks higher.

By temporarily doing away with the circuit breakers, China is opening the door to those buyers. Investors here believe they will come, which is why we’re seeing this rebound in U.S. stocks right now.

What does Wall Street think about all this chaos?

I’ve been talking this morning and all week to a number of veteran traders and every one of them is saying this is not panic selling in the U.S.

For the past three days in a row we’ve seen late-day buying of U.S. equities, with U.S. investors buying depressed shares late in the day.