Stock market correction deepens on Friday afternoon

10 February, 2018, 09:45 | Author: Shannon Aguilar
  • Markets Stabilise After Turbulence Last Week

For a while Friday, it was anybody's guess whether the weeklong sell-off would ease or worsen.

The U.S. stock market mostly recovered after an early plunge Tuesday and was down moderately in late morning trading, raising hopes of a halt to a global sell-off. "The average experienced two drops of more than 1,000 points and two gains of more than 400 points". The blue chip average suffered its second 1,000-point drop in a week on Thursday. The Nasdaq Composite was down 0.9 percent at 7,051.98.

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

At 12:56 p.m. ET, the Dow Jones industrial average was down 668 points (-2.7%), the S&P 500 was down 64 points (-2.4%), and the Nasdaq was down 190 points (-2.7%). The Nasdaq Composite Index gained 97.33 points, or 1.44 percent, to 6,874.49.

The three indexes finished the week down more than 5 per cent. Chinese officials denied the rumor, but it is clear that they have been buying fewer Treasurys over the past years.

Technology companies accounted for most of the broad gains, outweighing losses in energy stocks, which slumped as US crude prices declined. Crude slumped 3.5% on Friday and slipped below $60 a barrel for the first time this year.

US stocks started to tumble last week after the Labor Department said workers' wages grew at a fast rate in January.

As interest rates rise, the value of existing bonds falls and borrowing to invest becomes more expensive.

The recent market losses are also bigger than the annual gross domestic product of the United Kingdom.

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Stocks swung wildly in another volatile day of trading Friday. Even with the rebound, this was the worst week for the market in about two years.

Stocks are mixed in the early going as traders digest a batch of company earnings reports.

The market, now in its second-longest bull run of all time, had not seen a correction for two years, an unusually long time.

Investors were weighing whether the sharp swings were the start of a deeper move down or just clearing the way before a resumption of the aging bull market, which would turn nine on March 9, Reuters noted. Such a rapid rise is unusual, and market analysts long warned that a pullback was overdue. The S&P 500 is down the same percentage, plummeting to close at 2,581 on Thursday.

Investors also point to additional pressure from the violent unwinding of trades linked to bets on volatility staying low.

Treasury bond prices also came under pressure in January because there was a rumor China would invest less in US government debt. "In this case, US investors' demand for safe fixed income securities would just replace riskier emerging markets investments", writes Oxford Economics. The worry, he said, is that the Fed will raise interest rates too quickly.

The economy is already running hot, with the nation's unemployment rate at a 17-year low of 4.1 per cent. That also sent the pound higher.

Some companies rose after reporting quarterly results and outlooks that beat Wall Street's forecasts. And major economies around the world are growing in tandem for the first time since the Great Recession.

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