Dow Falls By Record Number, Bounces Back

Anthony Matesic Gordon Charlo

Anthony Matesic Gordon Charlo

US market indexes were lower Wednesday.

By 12:24 p.m. ET, the Dow Jones Industrial Average was down 499.18 points, or 2.01 per cent, at 24,394.17, the S&P 500 was down 44.5 points, or 1.65 per cent, at 2,637.16. After numerous turns higher and lower, it wound up with a gain, coincidentally, of 567. That meant Tuesday was likely to be one of the most watched days on the markets in years.

Technology companies, the leading sector over the past year, and banks fell the most.

The highest bond yields in years are making bonds more appealing to investors compared with stocks. Also, some people have options to buy their company's stock in the future.

Citro noted that Monday's Dow Jones decline of 1,175 points was really "no big deal" from a historic perspective.

It was another shaky day on Wall Street as indexes rallied in the morning then sank in the last few minutes of trading.

Bond prices fell. The yield on the 10-year Treasury note rose to 2.87 percent. It was the busiest day of trading on the New York Stock Exchange since November 10, 2016, two days after the presidential election. The S&P 600 Index closed at 918.54 for a gain of 0.13 points or 0.01%.

The Dow is 10 percent below the record high it set just two weeks ago, putting it in what is known on Wall Street as a "correction".

The retreat in equities had been long awaited by investors as the market climbed steadily to record high after record high with few bumps.

Several other companies also have announced employee bonuses or enhanced benefits since Republican lawmakers and President Donald Trump sped a $1.5 trillion tax cut plan into law at the end of past year.

"You had people positioned for an environment of lots of central bank easing, low inflation and interest rates and importantly low volatility", said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Co.

In fact, the big market rebound Tuesday was at least partly borne of investors' realization that there's no reason to flock to the exits when the economy is this sound.

Torsten Slok, chief global economist at Deutsche Bank, told the Financial Times: "Markets are coming to the conclusion that the US economy is close to overheating and therefore that the risks of inflation are bigger than the risks of a recession".

Tommy Kalikas
Main US inventory indexes buying and selling sharply larger an hour earlier than closing bell

Still not convinced? After the crashes in 1987 and 2000, the Federal Reserve began to cut interest rates, which gave further gains to bonds.

Schutte added that corrections can end quickly, and they often do so when investors see evidence of continued economic growth.

If the economy gets much stronger, it could touch off inflation, which has been mysteriously missing for the nine years of the post-crisis recovery.

The bull market has feasted on extremely low bond rates.

Also Wednesday, Australia's S&P/ASX 200 gained almost 0.8 percent to 5,876.80.

A 1,000-point drop "is not fun, but it certainly wasn't historic percentagewise", he said.

The Russell 2000 is down 27.54 points, or 1.8 per cent. It fell 76 cents, or 1.2 percent, to close at $63.39 a barrel in New York Tuesday. Heating oil dipped 3 cents to $1.99 a gallon.

The Nasdaq is down 188.96 points, or 2.6 per cent.

The market's turmoil began last Friday and has continued this week as investors anxious about early signs of inflation. The Nasdaq Composite was down 0.9 percent at 7,051.98.

Advancing issues outnumbered decliners on the NYSE by 2,068 to 720. FTEU3 lost 2.50 percent and MSCI's gauge of stocks across the globe .

Benchmark U.S. crude lost 21 cents to $61.58 per barrel in electronic trading on the New York Mercantile Exchange.

The U.S. dollar weakened against the Japanese yen early Tuesday, trading at 108.61 yen, down from 109.12 on Monday. The euro was trading at $1.2384.

"Tokyo led a collapse throughout the region, diving more than five percent, with Hong Kong down more than four percent and Sydney sinking three percent". That was its biggest loss since August 2011, when stocks were reeling as investors were fearful about European government debt and the USA had its credit downgraded after the debt ceiling impasse.

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