Saturday, 23 March, 2019

Wall Street rebound fades in busy trade after steep falls

The Dow just lost 4.6%. What does that mean for you Drew Angerer Getty Images
Patty Aguilar | 07 February, 2018, 04:30

Market experts also attributed the selloff, including the overnight slide in S&P 500 futures, to the violent unwind of a trade betting on volatility in USA stocks staying low as the CBOE Volatility index, known as the VIX, notched its biggest one-day jump on Monday in over two years. South Korea's Kospi had declined 1.5 percent. While Donald Trump's White House has correctly pointed to strong economic fundamentals as a more important long term story and the role of the tax cuts in driving this, they've failed to appreciate the impact that their policies could have on inflation, and therefore the path of interest rates.

If the S&P 500 declines 7% in any trading day, all trading on the New York Stock Exchange is halted for 15 minutes.

The index closed up more than 560 points after it was down 500 points following the 9:30 a.m. opening bell, marking a 10% slide since it reached a record high on January 26. US economic growth was running at a 2.6 annualized rate in the fourth quarter last year and the unemployment rate is at a 17-year low of 4.1 percent.

The slump means the Dow Jones has wiped out of all of its gains so far in 2018, following months of surges fuelled by optimism about the U.S. economy, corporate earnings and the global outlook. The Nasdaq composite rose 148.36 points, or 2.1 percent, to 7,115.88.

Despite the big swings, Tuesday's trading looked similar to the patterns that have shaped the market for the a year ago: investors bought retailers like Amazon and Home Depot and technology and industrial companies and banks, which do better when economic growth is strong.

Many stock market investors appear to have been betting on a return to a so-called Goldilocks economy, with rising growth and low inflation. However, most market watchers wait until the market has closed for the day before declaring that an index or other measure has officially entered a correction. That's making bonds more appealing to investors compared with stocks. It was the busiest day of trading on the New York Stock Exchange since November 10, 2016, two days after the presidential election.

The market rout can be traced to the jobs report on Friday, which showed a pickup in the pace of wage growth. Higher rates act like a brake on the economy by slowing down borrowing and lending. The move was a break from many months of relative calmness and left market participants grappling with the implosion of products that bet against volatility. "And I think volatility is likely to be higher in 2018 than it was in 2017".

Investors were eyeing the recent steep slide as an opportunity, an extreme example of the "buying the dip" that has symbolized the market's steady climb to record highs.

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Slow free agency a concern for players' union
Starting pitchers Yu Darvish, Jake Arrieta and Alex Cobb and position players Eric Hosmer, Mike Moustakas and J.D. No, they are outraged. "It is common at this point in the calendar to have large numbers of free agents unsigned.

While they can be scary, market pullbacks prevent stocks from overheating and give investors who were stuck on the sideline a chance to get in.

As the stock market fell on Monday, the White House said the fundamentals of the US economy are strong.

Since the Brexit vote its fortunes had been closely linked to the value of the pound - with falls in sterling versus the dollar boosting its constituent companies with high dollar earnings. BlackRock's iShares iBoxx High Yield Corporate Bond ETF, which has about $16 billion in assets, fell 0.6 percent to its lowest share price since December 2016.

Among the biggest losers Tuesday was the Nikkei 225, which had ended 4.7 percent lower.

In Europe, Germany's DAX fell 2.3 per cent and the CAC 40 in France lost 2.3 per cent.

On Monday, the Dow finished down 4.6 per cent while the S&P 500 sank 4.1 per cent.

Away from the top tier, the FTSE 250 Index suffered a drop of more than 2.1% or 427.93 points to 19,262.56 points. The last fall of that size came in August 2011 when investors were fretting over Europe's debt crisis and the debt ceiling impasse in Washington that prompted a US credit rating downgrade.

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