Well, sort of. Typically, market watchers rely on the S&P 500 index to gauge the health of the broad USA market instead of the 30 stocks in the Dow.
“Investors are fearful that inflation. will rise faster than expected due to the impact of a weak dollar on import prices and rising wages, and that as a result interest rates may also rise faster than expected”, wrote Colin Moore, global chief investment officer at Columbia Threadneedle Investments.
Fears about inflation and soaring bond yields drove the Dow down about 1,300 points on the week.
By comparison, it usually takes stocks more than two years to bounce back from bear market and almost six years to recoup all the losses from a “mega bear”, like the 2007-2009 downturn amid the financial crisis and the 2000-2002 tech wreck. Numerous companies that rose the most over the a year ago have borne the brunt of the selling. “We’ve all enjoyed it”, said Rich Guerrini, CEO of PNC Investments.
“There is a lot of concern in the rising yield in the 10-year Treasury note”, said David Kass, professor of finance at the University of Maryland.
USA stocks began to wobble last Friday after a healthy United States labor market report sparked a spike in bond yields and fears of rising inflation. “I didn’t know it would be this bad today, but clearly it’s not over”.
The latest decline takes the Dow, which is now down 3.5% this year, back to where it was on November 28, 2017.
The U.S. House of Representatives early on Friday approved a bill to fund the federal government through March 23 and to increase overall spending limits over two years, sending the legislation to President Donald Trump.
“That’s part of this recalculation that has gone on in the market: How do we factor in higher bond yields?”
US crude fell 3.06 percent to $59.28 per barrel and Brent was last at $62.96, down 2.85 percent on the day. Silver rose 10 cents, or 0.6 percent, to $16.34 an ounce, and copper fell a penny to $3.08 a pound. That only happened eight times all of previous year, the fewest since 1964, according to LPL.
Volatility returned to markets on Thursday as United States indices finished the day sharply lower, plunging them into correction territory.
United States markets have been under pressure all week, with the Dow notching its biggest loss ever in terms of points on Monday, rallying on Tuesday and finishing modestly lower Wednesday. “It can take two to three weeks to work through the system”.
In “old days”, when good news was reported, Stock Market would go up. That combination usually carries stocks higher.
“We had an epic run”.
“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 yield on the US 10-year Treasury bond touched a four-year high before falling back to 2.83 percent. “Obviously people are reacting”.
In debt markets, Spanish risk premium was placed in 67.2 basic points, with profitability of ten-year bond at 1.438%. Inflation can also send bond yields higher, which makes it more expensive for individuals, companies and even the USA government to borrow money.
The economy is strong, but investors are anxious about inflation, and the possibility that the Federal Reserve will raise interest rates faster than expected to fight it. In typical and predictable fashion, Wall Street keeps its blinders on.