The Dow Jones industrial average fell as much as 500 points in early trading, bringing the index down 10 percent from the record high it reached on January 26.
USA stocks rallied Tuesday as a late surge helped them regain nearly half their losses from the day before, when they had their biggest plunge in 6 ½ years amid heavy trading and huge swings for the market.
On Tuesday, the 30-stock index swung 1,167.5 points before closing 567 points higher. Benchmarks in Australia, South Korea and Southeast Asia also retreated.
As scary as those developments may sound, a correction-technically, a drop of about 10%-can be considered healthy, or even a buying opportunity for investors who think the market may still have further to run. “Also, if we see some stabilizing in interest rates and bond yields in particular, that would seem to indicate what’s going on there has settled down”.
Mnuchin said he had checked with market participants earlier Tuesday and had been assured that markets had functioned well with no systemic issues during the big market declines on Monday. Its latest appearance, in my view, isn’t another financial crisis.
Global markets mostly rose and appeared calmer on Wednesday.
“Investors are fearful that inflation. will rise faster than expected due to the impact of a weak dollar on import prices and rising wages, and that as a result interest rates may also rise faster than expected”, wrote Colin Moore, global chief investment officer at Columbia Threadneedle Investments.
Stocks recovered modestly, and the Dow was down about 400 points, or 1.6%, later in the afternoon.
“In the ‘old days, when good news was reported, the Stock Market would go up”.
Many analysts see worries about higher U.S. interest rates and excessive valuations as the catalyst for a pullback that was amplified by computerised trading mechanisms that can exacerbate movements in stocks.
The rout marked a stark turnabout in investors’ mood from just two weeks ago, when indexes set their latest record highs.
The SP energy index was up more than 0.4%, led by Anadarko Petroleum’s 3.5% gain and an uptick in oil prices. Facebook and Boeing have both fallen sharply.
Volatile high-volume trading conditions in NY moved stocks wildly on Tuesday, with the Dow Jones closing up 567 points, or 2.3%, at 24,912. Boeing, Goldman Sachs and Home Depot took some of the worst losses.
The pan-European FTSEurofirst 300 index lost 2.50 per cent and MSCI’s gauge of stocks across the globe shed 1.22 per cent. The SP was up 35.95 points, or 1.4 percent, at 2,616.95 and the Nasdaq Composite.IXIC was up 104.04 points, or 1.54 percent, at 6,881.19.
Major indexes in Asia and Europe sank Tuesday and US markets started sharply lower, zigzagging between gains and losses. Many market watchers have been predicting a pullback for some time, saying stock prices had become too expensive relative to company earnings. That’s less than the 10 percent seen as a correction.
“The bond market has definitely got the stock market’s attention”, said Ryan Detrick, senior market strategist at LPL Financial. A 3 percent yield is looked upon by investors as a sign that investors are fleeing the risk of stocks for the relative safety of bonds. Manufacturing is rebounding. Households and businesses are spending freely.
That’s good for the economy, but investors anxious it will hurt corporate profits and that rising wages are a sign of faster inflation. That combination usually carries stocks higher. At that time, the forward price-earnings ratios for stocks stood at almost 34 for the SP 500 index. Instead, policymakers will be raising interest rates to keep inflation in check.
CURRENCIES: The dollar edged up to 109.38 yen from 109.33 yen. The euro was trading at $1.2384. Benchmark U.S. crude lost 21 cents to $61.58 per barrel in electronic trading on the New York Mercantile Exchange. It fell 64 cents the previous session to $61.15. While many of these options lost value recently, most people could not have spent the money from these options until years in the future.