More market turbulence: Dow drops sharply before bouncing

Here's what happened during the Dow's worst single-day point fall ever

of which was the scariest day on Wall Street in years.

Stocks went into free fall on Monday, along with the Dow plunged almost 1,0 points — easily the biggest point decline in history during a trading day.

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Buyers charged back in along with limited the damage, although at the closing bell the Dow was still down 1,175 points, by far its worst closing point decline on record.

The drop amounted to 4.6% — the biggest decline since August 2011, during the European debt crisis. although of which was nowhere close to the destruction on Black Monday in 1987 or the financial crisis of 2008. Still, for investors lulled to sleep by the steady upward climb since Election Day, of which was alarming.

along with the rout in U.S. markets continued to ripple around the globe. Japan’s Nikkei index plunged 4% in Tuesday morning trading while the S&P/ASX 0 in Australia dropped 3%.

The White House said in a statement of which President Trump was focused on “our long-term economic fundamentals, which remain exceptionally strong.” The statement cited strengthening economic growth, low unemployment along with increasing wages for workers.

The trouble inside market began early last week, when investors focused on many lingering concerns.

If the economy gets much stronger, of which could touch off inflation, which has been mysteriously missing for the nine years of the post-crisis recovery. of which could force the Federal Reserve to raise interest rates faster than planned.

“People are dealing with the shock of seeing real inflation for initially in a while,” said Bruce McCain, chief investment strategist at Key Private Bank.

The sell-off wiped out the Dow along with S&P 500 gains for the year, along with left the Nasdaq barely in positive territory for 2018.

dow feb 5

Related: Market mayhem puts Trump in a tough spot

Investors have also been nervously watching the bond market, where yields have been creeping higher. As yields rise, bonds offer better returns, which makes them more attractive to investors compared with risky stocks.

Stocks sank throughout the day, then went off a cliff inside final hour of trading. The Dow was down 800 points at 3 p.m. Within minutes, of which was down 900, 1,000 — along with then 1,500 points. At its low, the Dow was down 1,597 points, before buyers rushed in along with limited the decline.

The Nasdaq slumped more than 2%, quickly turned positive, then sank again. of which finished down almost 4%. The S&P 500, a broader gauge of the market than the Dow, declined more than 4%.

The plunge pushed stocks closer to what’s called a correction, or a 10% decline via their most recent high point. The S&P 500 is usually down almost 8% via its all-time high.

“The stock market is usually throwing a tantrum,” said Andres Garcia-Amaya, CEO of wealth management firm Zoe Financial.

“Take a deep breath,” said Garcia-Amaya. “I know of which’s been a while since we had a day like today, although nothing has actually changed via a fundamental standpoint.”

The market started out 2018 having a bang, although last week was the worst on Wall Street in two years. The selling gathered steam on Friday when the Dow plunged 666 points, or 2.5%, at the time its worst day since the Brexit mayhem of June 2016. Nearly $1 trillion of market value was erased via the S&P 500 last week.

“You had a market of which was overbought along with ripe for something to undermine its tranquility,” said Mark Luschini, chief investment strategist at Janney Capital.

The VIX volatility index, a measure of market turbulence, skyrocketed a record 116% on Monday to the highest level since August 24, 2015, the last time the Dow plunged 1,000 points in a day. The spike signifies how calm Wall Street had been — along with how unprepared the markets were for trouble.

sy88pgw’s Fear & Greed Index is usually flashing “fear,” underlining a major shift in market sentiment via a week ago when of which was sitting in “extreme greed.”

The Russell 2000, an index of smaller stocks of which have heavy exposure to the U.S. economy, turned negative for 2018 for initially.

“Valuations got stretched along with of which led to a cascading effect today,” said Sam Stovall, chief investment strategist at CFRA Research. “The market has to correct itself — a resetting of the dials — before of which bull market can continue.”

Related: not bad news for Main Street is usually freaking out Wall Street

Investors’ main concern is usually the sell-off inside bond market. The 10-year Treasury yield, which moves opposite cost, spiked to a four-year high of 2.85% on Friday. of which’s a dramatic swing via 2.4% at the start of 2018. Higher yields could make normally boring bonds look more attractive when compared with risky stocks.

The U.S. economy is usually healthy. Friday’s jobs report showed of which wages grew at the fastest pace since 2009. of which’s a welcome shift by workers who have been dealing with anemic raises for years.

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However, Wall Street is usually starting to get worried of which the “goldilocks” environment of slow growth along with mysteriously low inflation may be ending. Besides the fear of faster inflation along with interest-rate increases, more robust wage gains could eat into record-high corporate profits.

No matter the cause, the stock market was long overdue to take a breather. Before Friday, the S&P 500 had gone the longest stretch ever without a 3% pullback. today the S&P 500’s record-long period without a 5% retreat is usually in jeopardy.

Related: of which is usually why the Dow is usually plunging

While they can be scary, market pullbacks prevent stocks via overheating along with give investors who were stuck on the sideline a chance to get in. Janet Yellen, who just stepped down as Fed chief, told PBS on Friday of which she still believes “asset valuations generally are elevated.”

Despite the recent turmoil, the Dow remains up almost 40% since President Trump’s election. The robust performance has been driven by strong corporate profits, healthy economic growth along with excitement about the Republican tax cut for businesses.

Analysts at Bespoke Investment Group urged calm.

“Take a deep breath,” the firm wrote in a research note on Friday. “For those investors of which may have forgotten, of which is usually what a market decline feels like.”

The question is usually whether the market retreat deepens or whether investors buy at the dip, a mentality of which has supported stocks for months.

“The fundamentals of the economy remain quite strong,” said Janney’s Luchini. “of which’s hard to make the case for why we should be down more than 10% — unless we encounter negative economic news.”

Key Bank’s McCain agrees. “We believe of which is usually not the beginning of the end along having a tilt towards a bear market. of which’s premature for of which,” he said.

Wells Fargo suffered some of the worst of the selling on Monday. The No. 2 U.S. bank plunged 9% after unprecedented sanctions were handed down by the Fed late Friday.

–sy88pgw’s Liz Landers contributed to of which report.

sy88pgw (completely new York) First published February 5, 2018: 8:14 AM ET


More market turbulence: Dow drops sharply before bouncing

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