Febrero 19, 2018

United States stocks tumble as Dow sheds another 1000 points

09 Febrero 2018, 10:46 | Dolorita Barahona

Stocks open mixed on Wall Street

This is why the Dow is plunging

The Dow Jones industrials plunged more than 1,000 points Thursday, deepening a weeklong sell-off and dragging the stock market into an official correction for the first time in two years as fearful investors sought to get out before their losses mounted.

The market's main gauge of volatility, the CBOE Volatility Index, fell to 29.82 on Thursday, more than twice what it was a week ago but down off a two-and-a-half year high above 50 points hit on Tuesday.

Equity investors are anxious the likelihood of a stronger USA economy and higher inflation could lead the Federal Reserve to boost interest rates more times than previously anticipated.

US stock index futures were down about a third of a percent, setting Wall Street for a lower open on Wednesday, an nearly 2 percent gain in the previous session failing to calm the nerves following the Dow's biggest intraday fall on Monday.

The Standard & Poor's 500 index, the benchmark for many index funds, also fell sharply after relinquishing early gains. The Nasdaq composite slid 60 points, or 0.9 percent, to 6,716.

On February 5, 2018, the Dow Jones Industrial Average (DJIA) suffered its greatest same-day drop in history and the biggest one-day percentage decline since the 2011 Eurozone crisis.

The U.S. dollar remained fairly resilient despite the stock market sell-off, which at one stage Monday saw the Dow shed 1,597 points.

The economy is strong, but investors are anxious about inflation, and the possibility that the Federal Reserve will raise interest rates faster than expected to fight it. The Dow moved almost 500 points during trading Wednesday before closing down 19 points, or 0.08 percent, at 24,893.

In Europe, the British FTSE 100 index fell 2.4 percent while the CAC 40 in France fell 2.8 percent and Germany's DAX was down 2.7 percent.

While Wall Street has been calling for a correction for some time, given the market's euphoric rise, the fall has been more violent and quicker than anticipated. The pound rose sharply after the United Kingdom central bank signaled it could raise interest rates soon.

The losses were broad, with technology stocks as well as restaurant chains, cruise lines, department stores and other consumer-focused companies accounting for much of the market's decline.

Concerns about rising interest rates weren't helped by an unexpectedly hawkish inflation report from the Bank of England yesterday, while the latest Chinese trade data suggested that the Chinese economy appeared to be ticking along nicely, even if the trade surplus did shrink quite sharply as a result of a big jump in imports. The Dow is up 23 percent over that time, the S&P 500 17 percent.

He said indications of "inflation risk on the horizon" - including higher-than-expected jobs and wage growth last week amid higher labor costs in manufacturing and non-manufacturing - was fueling the market's nose dive. "When the market recalibrates, everyone becomes somewhat nervous and concerned". South Korea's Kospi gained 0.5 percent and the Hang Seng of Hong Kong rose 0.4 percent. Consider this: The S&P 500 has risen or fallen 1% five times in the past two weeks. The April gold bullion contract was up US$4.40 to US$1,319.00 an ounce.

The double-digit percentage stock decline has occurred even though Wall Street stresses that the health of the economy, labor market and USA businesses remain strong.

The 10-year Treasury bond also reached a four-year high of 2.88 percent on Thursday, bringing about concerns of rising inflation.

The Dow finished the day up 567 points, or 2.3 percent.

Financial analysts regard corrections as a normal event but say the latest unusually abrupt plunge might have been triggered by a combination of events that rattled investors.

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