Febrero 19, 2018

USA stocks enter correction as rate-hike fears return

09 Febrero 2018, 12:37 | Dolorita Barahona

AP News in Brief at 6:04 am EST

The Dow Jones Industrial Average sank as much as 1,500 points before recovering to close just down 1,175. The S&P 500 Index dropped more than 4

The Dow and the S&P 500 are both 10 per cent below the record highs the indexes set just two weeks ago, putting them in what is known on Wall Street as a "correction".

Analysts have said the swings in the U.S. markets in part reflect big investors moving to sell stocks and put money in other assets, such as bonds, which benefit from higher interest rates.

However, over in the U.S., gains were entirely wiped out on Thursday, with the Dow shedding 4.2pc, the S&P 500 3.8pc and Nasdaq 4pc lower after a volatile late trading session. By closing at 23,860 points, the Dow Jones industrial average was set back to its level on November 17, 2017, and officially corrected.

The S&P 500 dropped 100.6 points or 3.75% to 2,581, while the Nasdaq slid 274.8 points or 3.9% to 6,777.1.

The Cboe Volatility Index was weaker on Thursday, near 27.41, which is still more than twice as high as its recent, unprecedented lows, having suffered its biggest-ever one-day spike on Monday.

"In addition, Wall Street is now at the same level from November 2017".

Analysts blamed higher treasury bond yields for Thursday's poor performance, also saying the market has become too expensive and was due for correction.

The technological Nasdaq Composite recorded a decline of 0.9% after stocks of large technology companies retreated.

On Monday, the Dow had plunged by almost 1,200 points or 4.6%, triggering losses in Asia and Europe. They also experienced corrections.

Jim Citro, vice president of investments and branch manager at Stifel in Quincy, said his advice to nervous clients who called him this week about the wild swings in the stock market was simple.

S&P 500 index futures fell 0.4% vs. fair value.

"There is a lot of concern in the rising yield in the 10-year Treasury note", said David Kass, professor of finance at the University of Maryland.

Activity was similarly volatile on the bond market.

The Dow finished with a decline of 1,033 points, the second-worst point drop in history, eclipsed only by Monday's 1,175-point nosedive.

USA stocks fell to two-month lows after a nine-day swoon wiped out nearly 9 percent in the S&P 500.

Also worrying markets was a government budget proposal United States lawmakers in Congress have announced, which raises spending caps and could fan inflation. Historically, the market goes through a correction of 10% or more every two years.

"It means that there are more investors with a negative view on the market in the long term", said Oh Hyun-seok, a market analyst at Samsung Securities.

Few big companies emerged unscathed, with Dow giants Boeing and Caterpillar losing around five percent, around the same range as tech titans Amazon and Facebook. A pickup in inflation could prompt the Federal Reserve to raise interest rates at a faster pace, which would act as a brake on the economy.

The Australian dollar fell by 1 per cent to 78.2 USA cents. The last fall of that size came in August 2011 when investors were fretting over Europe's debt crisis and the debt ceiling impasse in Washington that prompted a US credit rating downgrade.

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