Stocks take another tumble, Dow dives more than 1000 points

On Monday, the Dow took its biggest single-day point plunge in history.

Sue Noffke, UK equities fund manager at Schroders, told the BBC that given how well stock markets have been doing for the past few years, the sell-off this week was not that unusual.

But stocks are a higher-risk investment than bonds, which are backed by the United States Treasury. The S&P 500, for example, is one of the major fallers, was down 7.8 percent since its latest record high on January 26 as of Monday’s close.

It has fallen 9.8% since its 11 January high, nearing a 10% decline which is deemed to be a technical correction. But that trade has turned bad amid wild price swings that have turned suddenly violent since the market’s peak.

The most immediate reason is a fear of inflation. That’s great news for Main Street.

The Federal Reserve combats inflation by raising its interest rates. The Shanghai Composite Index tumbled 5.5 percent before ending the day down 4 percent at 3,129.85.

Asian markets fell more sharply.

The drop extends losses from last Friday, when the index fell 665.75 points, the seventh largest one-day drop ever. But with a strong economy comes concern over inflation and rising interest rates, which can affect corporate profits.

Stocks rallied on Wednesday, with the Dow closing up 567 points, or 2.3%.

Before then, the index had not seen a decline of that magnitude since August 2011.

The Dow’s plunge on Monday set off global shock waves.

The percentage decline on Thursday, 4.2 percent, wasn’t almost as bad as the scary days of the 2008 financial crisis.

The NYSE, Nasdaq and other exchanges put these circuit breakers in place after the October 1987 crash and a subsequent one in 1989.

A steep dive in the final minutes of trading in the U.S., shortly before the NZX opened at 10am, put the Dow into “correction” territory, down 10.3 per cent on the record it set on January 26. Think of it as an emergency brake. This would be much more severe than what happened Monday.

The first level gets triggered if the S&P falls 7% between the opening of trading hours at 9:30 a.m.in NY and 3:25 p.m.

Does all of this mean we’re entering a recession? Markets can not be one way.

“Seemingly the only hope for the markets at the moment is that investors suddenly decide that the sell-off has been a bit overdone”, said Connor Campbell, a financial analyst at Spreadex. Unemployment is historically low, and there are more open jobs than people to fill them.

Sparking the turbulence was a report released last week showing that hourly wage growth rose at its fastest pace since 2009. Consumer and business confidence are near record levels.

USA stocks ended sharply lower on Thursday as the rise in yields continued to weigh on the market.