Dow Jones plunges 1,000 points as Wall Street indexes in ‘correction’
Both the Dow and the Standard & Poor’s 500, have dropped 10% from their all-time highs, set on January 26.
Stocks on Wall Street plunged again on Thursday as for the second time in four days the Dow Jones industrial average sank more than 1,000 points.
The two best-known stock market indexes, the Dow and the Standard & Poor’s 500, have dropped 10% from their all-time highs, set on January 26.
That means they are in what is known on Wall Street as a “correction,” their first in almost two years.
Stocks fell further and further as the day wore on and suffered their fifth loss in the last six days.
Many of the companies that led the market’s gains over the last year have struggled badly in the last week.
They included technology companies, banks, and retailers and travel companies and house builders.
After huge gains in the first weeks of this year, stocks started to tumble last Friday after the labour department said workers’ wages grew at a fast rate in January.
That is good for the economy, but investors worried it will hurt corporate profits and that rising wages are a sign of faster inflation.
It could prompt the Federal Reserve to raise interest rates at a faster pace, which would act as a brake on the economy.
“Far and away the most important things are the fear that the Fed is going to make a mistake, and higher wages are going to cut into margins,” said Scott Wren, senior global equity strategist for Wells Fargo Investment Institute.
The worry, he said, is that the Fed will raise interest rates too quickly.
The Dow Jones industrial average lost 1,032.89 points, or 4.1%, to 23,860.46. Boeing, Goldman Sachs and Home Depot took some of the worst losses.
The S&P 500, the benchmark for many index funds, shed 100.66 points, or 3.8%, to 2,581. It has not been that low since mid-November.
The Nasdaq composite fell 274.82 points, or 3.9%, to 6,777.16.
Tom Martin, senior portfolio manager with Globalt Investments, said he did not see anything specific moving the market lower, just a continuation of a shift in investor mindset from fear of missing out in a rising market to worry of clocking big losses in a market that has turned.
“This is going to take longer to work out than people expect,” he said.
“In January we talked about fear of missing out. What we have now is what I call fear of getting caught.”
The losses were broad. Eight stocks fell for every one that rose on the New York Stock Exchange and 490 of the companies in the S&P 500 took a loss.
The market did not get much help on Thursday from company earnings reports, several of which disappointed investors.
While US companies mostly did well at the end of 2017, a number of them had a weak finish to the year.
Hanesbrands, which makes underwear, T-shirts and socks, reported a smaller profit than investors expected, and its forecast for the current year did not live up to analysts’ estimates either.
The company also said it will pay 400 million US dollars to buy Australian retailer Bras N Things. The stock dropped 2.39 dollars, or 10.9%, to 19.57 dollars.
IRobot, which makes Roomba vacuums, plummeted 32% after projected a smaller annual profit than Wall Street was expecting. The stock dropped 28.24 dollars to 59.80 dollars.
Twitter had a good day, soaring 12% after turning in a profit for the first time. Its fourth-quarter revenue was also better than expected. The stock rose 3.27 dollars to 30.18 dollars.
Online delivery company GrubHub soared after it announced a partnership with Yum Brands, the parent of Taco Bell and KFC.
GrubHub will provide the delivery people and technology to let people order food from those restaurants. GrubHub jumped 19.13 dollars, or 27.4%, to 89.04 dollars.
Stocks in Europe declined and bond yields increased after the Bank of England said could raise interest rates in coming months because of the strong global economy. That also sent the pound higher.
Britain’s FTSE 100 fell 1.5% and the French CAC 40 lost 2%. Germany’s DAX declined 2.6%.
Bond prices wobbled and turned higher. The yield on the 10-year Treasury note rose to 2.83% from 2.84%.
Rising yields have made bonds more appealing to some investors compared to stocks. The yield on the 10-year note was as low as 2.04% as recently as September.
In Tokyo the Nikkei 225 index rose 1.1%. South Korea’s Kospi gained 0.5% and the Hang Seng of Hong Kong rose 0.4%.