Febrero 19, 2018

Volatile market a good time to brush up on financial terms

09 Febrero 2018, 11:45 | Dolorita Barahona

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US stocks struggle to stabilize after entering'correction

Wall Street ran out of steam on Wednesday after an early surge as investors were still cautious after a bruising sell-off that saw the Dow Jones Industrial Average post its biggest intraday drop on record this Monday. After numerous turns higher and lower, it wound up with a gain, coincidentally, of 567. The decline was overdue, according to David J. Kostin, chief US equity strategist, at Goldman Sachs.

Thursday's 3.8% loss took the S&P 500's decline since its January 26 record past 10%, meeting the accepted definition of a correction.

The Dow closed at 24,912, a 2.33 percent gain, while the S&P 500 finished up 46.27 points to 2,694, a 1.75 percent increase.

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 selling has continued this week, worsened by technical factors including the implosion of trading strategies that had bet on low volatility.

Corrections are seen as entirely normal occurrences, and the market, now in its second-longest bull run of all time, hasn't seen one in two years, an unusually long time.

Strategists said that the decline in stocks was overdue after 2017, a year that saw the S&P 500 jump 19 percent, and may continue despite the almost 2 percent gain in the index on Tuesday.

This is how many stocks in the S&P 500 index have already lost at least 20% of their value in the midst of this sell off, according to CNBC. The Nasdaq composite fell 1.7 percent.

The move in yields kept equity investors nervous about higher rates and inflation.

The Cboe Volatility Index, known as the VIX, fell 2.3 points to 27.73, but that was still more than twice levels generally seen in the past few months. "The tax cuts may heat up the economy more than the Fed anticipated but I don't think that's a problem for this year".

Treasury bond prices have weakened in the past week-and-a-half as investors adjusted for the likelihood of a stronger USA economy and higher inflation, which could lead the Federal Reserve to boost rates more times than previously anticipated.

USA stocks finished lower on Wednesday, losing ground late in the session as a jump in Treasury yields kept investor nervousness high. The S&P fell 7.1 per cent between October 18 and November 15, including 5 drops of more than 1 per cent.

The SPI200 futures contract was down 80 points or 1.38 per cent at 5,732 points.

European markets have opened in positive territory, with the FTSE 100 index up 0.72 per cent, within touching distance of the 7,200 points mark, at 11.15am.

The dollar was barely up against a basket of currencies, paring gains as Wall Street rallied late. The euro slipped to $1.2372 from $1.2377. 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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