Dow loses more than 650 points as United States stocks swoon

05 February, 2018, 06:28 | Author: Lora Ball
  • Markets Insider

Both the Dow and S&P 500 suffered their biggest weekly drops since early 2016 - roughly 4% each. Investors are anxious it could prompt the Federal Reserve to raise interest rates faster than expected.

USA hiring picked up in January and wages rose at the fastest annual pace since the recession ended, as the economy's steady move toward full employment extended into 2018.

"The market is becoming more vigilant about these concerns, and that's good and healthy".

The better-than-expected January employment report showed a surge in job growth and the largest wage gain in more than 8-1/2 years, fuelling expectations that rising inflation will prompt the Federal Reserve to hike interest rates more aggressively this year.

Fears of rising inflation sent bond yields higher and contributed to the stock market swoon after the government reported that wages grew last month at the fastest pace in eight years.

"For months I've been saying the market is underestimating what the Fed will do in raising interest rates", Jurrien Timmer, director of global macroeconomics for Fidelity Investments, told NBC News.

Most media stocks have been dragged down, along with the market.

President Donald Trump has repeatedly taken to Twitter to tout the stock market gains as a sign of his administration's success, and cited the Dow's gains in speeches and appearances.

Other exceptions Friday included Netflix and Amazon, up 1 percent and 3 percent, respectively.

Still, Friday was the Dow's worst drop in percentage terms since June 24, 2016, when the markets were rocked by Britain's surprise vote to leave the European Union. As well as energy shares dropping more than three per cent.

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"People are finally starting to reprice reflation, it's about time", said Ms Jeanne Asseraf-Bitton, head of global cross-asset research at Lyxor Asset Management.

The gap between 10-year Treasury Inflation Protected Securities (TIPS) and the 10-year Treasury notes reached its highest level since September 2014. Stocks haven't had a pullback of 10 per cent or more in two years, and hit their latest record highs just one week ago.

Exxon lost 5.7 percent and Chevron fell 3.7 percent.

Looking ahead, observers advise watching the Asian markets Monday for its likely negative reaction to NY trading today.

The Dow Jones industrial average tumbled more than 660 points, or about 2.5 percent.

However, not all players in the market are convinced the bull market that saw an increase of 5.6% in the S&P 500 during January has come to an end.

Friday's significant market dent comes after a week-long downwards spiral.

The January jobs report showed an increase of 200,000 jobs with the unemployment rate remaining unchanged at 4.1%.

"The bond market sold off and the expectation is three maybe four rate hikes this year in light of the jobs report", said Nolte.

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