“What’s been bothering the market is the speed with which they’re going up”, Briefing.com analyst Patrick O’Hare said of higher Treasury yields. And the Dow Jones was down 665 points on Friday alone. That was the worst point drop since the blue-chip average fell 678.92 points on October 9, 2008, in the midst of the nation’s financial crisis. However, the percentage decline was only the worst drop since June 24, 2016, when the gauge fell 3.4%.
Technology companies also fell.
The Toronto Stock Exchange’sS&P/TSX composite index unofficially closed down 254.89 points, or 1.61 percent, at 15,606.03, its biggest drop since May.
The Chicago Board Options Exchange (CBOE) saw 1.1 million call contracts traded on Thursday, compared to 627,629 put contracts.
That is not to say the market is collapsing.
KEEPING SCORE: The Standard & Poor’s 500 index fell 29 points, or 1 percent, to 2,792 as of 10:11 a.m.
“Sometimes we get something from out of the blue from other areas, but it really comes back to basic fundamentals of economics”, Timmer said. “It’s just not”, said Art Hogan, chief market strategist at Wunderlich Securities. There will be more market swings this years, and Wicker said he advocates riding it out.
“Even after some long overdue volatility, the S&P 500 still closed higher than it did on January 10”, McBride said.
Of course, this week’s slide does little to dent the overall gains the market has achieved since President Trump’s victory.
USA employers added a robust 200,000 jobs in January, slightly above market expectations for a 185,000 increase.
“The big picture concern is that wage growth will pick up and lead to more inflation”, said Nicholas Colas, co-founder at DataTrek Research.
Higher rates mean higher borrowing costs for consumers and businesses, which can slow economic growth. The 10-year Treasury yield jumped to as high as 2.85 per cent, a four-year high, putting pressure on the stocks.
More: 401 (k) investors: Is a “melt-up” happening in the stock market?
Average hourly earnings rose 0.3 percent in January to $26.74, building on December’s solid 0.4 percent gain. Equities are being tested by the surge in bond yields, with some fund managers saying 3 percent USA 10-year rates would signal a bond bear market.
This resulted in a rise in interest rates and a drop in stock prices this week.
Still, the Dow Jones industrials are 39.2 percent higher since Trump was elected despite Friday’s pullback.
MARKETS OVERSEAS: Major stock indexes in Europe declined.
Exxon Mobil Corporation (NYSE:XOM) is down 3% in electronic trading, after reporting fourth-quarter earnings below analysts’ expectations.
Even stock market bulls have long said that a pause – or even a dip – would help prevent the market from overheating.
The materials group, which includes precious and base metals miners and fertilizer companies, lost 2.5 per cent. Barrick Gold Corp. slipped 3.2 per cent to $17.13, and Goldcorp Inc. fell 1.5 per cent to $17.25. The stock market is on track for its worst week in two years, according to CNBC. Apple also reported lighter-than-expected iPhone sales for its previous quarter.