Stocks end wild week with rally; Dow down 5%

Lloyd Doyle
February 10, 2018

Stocks began to fall in early trading and their losses grew throughout the day.

The Dow is 10 percent below the record high it set just two weeks ago, putting it in what is known on Wall Street as a "correction".

Thursday marked another day of recent sharp swings, including the S&P 500's biggest drop in more than six years on Monday that pulled equities away from record highs.

"You will often see bounces off those levels", said Anwiti Bahuguna, senior portfolio manager at Columbia Threadneedle Investments in Boston.

The Dow Jones Industrial Average fell 1,032.89 points, or 4.15 per cent, to 23,860.46, the S&P 500 lost 100.66 points, or 3.75 per cent, to 2,581 and the Nasdaq Composite dropped 274.83 points, or 3.9 per cent, to 6,777.16.

Analysts cited higher Treasury bond yields as the catalyst for the drop, coupled with the view that the market surged to unsustainably high levels in December and January in the euphoria over USA tax reform.

In currency markets, the Canadian dollar closed at an average trading value of 79.31 cents United States, down 0.15 of a USA cent - continuing a sharp drop that has seen the loonie rocked by global equity volatility.

At the heart of this week's pullback in the market has been a rise in US bond yields due to growing expectations that a robustly performing economy will lead to higher inflation and a steady rise in official interest rates over this year.

All 11 major S&P sectors finished lower, with financials and technology the worst-performing groups.

Also driving rates higher is the projected increase in federal debt as a result of the big tax-cutting bill passed in December as well as the two-year spending deal signed by President Trump on Friday. All 30 components of the blue-chip Dow finished negative. Asian markets fell more sharply.

On Friday alone, the S&P 500 swung from gains of up to 2.2 per cent to declines of 1.9 per cent, echoing the big swings of the past week.

In currency markets, the dollar edged up to 108.87 yen from Thursday's 108.84 yen.

Bond prices fell. The yield on the 10-year Treasury note rose to 2.86 percent from 2.83 percent.

Stocks aren't falling because investors have doubts about the economy.

Volatility remained high compared to recent months.

"Those are all bond problems and ultimately those problems are going to cause a sell-off in the bond market", said Sanchez.

The market's main gauge of volatility, the Cboe Volatility Index, rose 3.07 to 30.80 on Thursday, almost three times the average level of the past year.

"Obviously there's a lot of concerned and nervous people".

Thursday marked another session this week with strong volume.

After a sharp loss Wednesday, benchmark USA crude lost 64 cents, or 1 percent, to $61.15 a barrel in NY. The S&P 500 and Nasdaq also rallied into positive territory.

Other reports by Iphone Fresh

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