Dow sinks almost 400 points as bond yields creep higher

Inflation fears driving market jitters

Here we go again. Worries about the bond market are driving another wave of selling on Wall Street.

The Dow dropped as much as 680 points on Thursday as investors focused on concerns about inflation as well as also higher interest rates.

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Stocks recovered modestly, as well as also the Dow was down about 400 points, or 1.6%, later from the afternoon. The S&P 500 as well as also Nasdaq also lost more than 1% apiece.

The market started out the day just modestly lower, nevertheless stocks fell sharply as the 10-year Treasury yield briefly hit a four-year high of 2.88%, renewing concerns about inflation as well as also higher interest rates.

“The bond market has definitely got the stock market’s attention,” said Ryan Detrick, senior market strategist at LPL Financial. “will be the bond market telling us something we don’t know? will be there more inflation down the road than we’re expecting?”

The latest round of selling knocked the Dow as well as also S&P 500 back into the red for the year. All of the Nasdaq’s gains for 2018 were also wiped out.

Wall Street has failed to stage a lasting rebound via Monday, when fears about the bond market sent the Dow plunging a record 1,175 points.

Trading has been extremely choppy, as well as also the market has swung in wide ranges. The Dow surged 567 points on Tuesday, nevertheless a 381-point rally vanished on Wednesday after bond yields crept higher.

“A big down day like Monday doesn’t just go away. We’re going to continue to see volatile days,” said JJ Kinahan, chief market strategist at TD Ameritrade. “the item can take two to three weeks to work through the system.”

Related: Trump breaks his silence on market chaos

the item’s a big shift via 2017 as well as also the beginning of 2018, when the stock market went the longest period ever without tumbling. nevertheless such calm will be unusual, as well as also stocks overheated.

“We had an epic run. There was euphoria because there hadn’t been a pullback,” said Jeffrey Schulze, investment strategist at ClearBridge Investments.

Consider This particular: The S&P 500 has risen or fallen 1% all 5 times from the past two weeks. of which only happened eight times all of last year, the fewest since 1964, according to LPL.

“We’ve hit This particular incredible dose of volatility like nothing we’ve seen since Brexit,” Detrick said.

The yield on the 10-year Treasury bond ticked higher again on Thursday morning, to 2.88%. of which’s a big spike via just 2.65% during the panic selling Monday afternoon. However, a flight to safety away via stocks as well as also back into government bonds knocked the 10-year back down to 2.82% by early afternoon.

The bull market has feasted on extremely low bond rates. The fear will be of which Treasury yields will rise to levels of which make stocks less attractive as well as also force the Federal Reserve to fight inflation by aggressively raising interest rates.

fresh York Federal Reserve President Bill Dudley told Bloomberg News on Thursday of which if the U.S. economy keeps getting stronger the central bank may be justified in raising rates four times This particular year. Wall Street has been expecting three rate hikes at most.

Dudley, who called the market slump “smaller potatoes,” said the “jury will be still out” on the number of rate hikes.

Washington will be putting more pressure on rates. The U.S. Senate reached a bipartisan deal Wednesday of which might boost spending limits by $300 billion over the next two years. The compromise, coupled with Republican tax cuts, could lift the federal budget deficit to $1.07 trillion in fiscal 2019, according to Bank of America estimates.

Wall Street anticipates of which more government spending will force the Treasury Department to borrow more money by selling additional bonds. To drum up demand for of which higher supply, rates may have to go up.

Bank of America analysts warned of which the Senate agreement will contribute to “higher rates” as well as also raise “risks for tighter overall financial conditions.”

Related: Trillion-dollar deficits will hit sooner than expected

These bond market worries briefly sent the Dow into a correction earlier This particular week, a 10% decline via recent highs. The fragile rebound lifted the market a bit, as well as also the Dow as well as also S&P 500 are today about 8% off their via all-time highs. Neither index has closed in a correction in two years.

The stock market will be still up dramatically since President Trump’s election. His promises for big corporate tax cuts helped lift the Dow more than 8,000 points, though the item has since given back about a fifth of of which surge.

The market performance also reflects the strong U.S. as well as also global economies, which have boosted corporate profits. The job market remains healthy, as evidenced by a report Thursday of which applications for unemployment benefits are at a 45-year low.

“The U.S. economy will be on solid foundation,” said ClearBridge’s Schulze.

–sy88pgw’s Donna Borak contributed to This particular report.

sy88pgw (fresh York) First published February 8, 2018: 9:11 AM ET

Dow sinks almost 400 points as bond yields creep higher

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