Dow Jones Plummets Again On Worries About Inflation


Friday's report showed wages grew at a faster pace in January, and investors anxious that that means inflation is speeding up, and that the Federal Reserve will have to raise interest rates faster than previously expected in order to keep that inflation in check.

That came on top a bond market slump, which has also been linked to inflation concerns.

Other major USA stock indexes also rebounded Tuesday, with the S&P 500 finishing up 46 points, or 1.7 percent, and the Nasdaq up 148 points, or 2.1 percent. Boeing, Goldman Sachs and Home Depot took some of the worst losses.

On Monday, the Dow finished down 4.6 percent while the S&P 500 sank 4.1 percent, to 2,648.94. Hong Kong's Hang Seng jumped 1.2 per cent to 30,953.48, while the Shanghai Composite gained 0.1 per cent to 3,376.36.

Corrections are seen as entirely normal during bull markets, and even helpful in removing speculative froth and allowing new investors to buy into the market at lower prices.

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Though many stock indexes are close to where they started the year, the losses mark a reversal of fortune following a sustained period of gains, a pullback that some market pros have been predicting for some time.

But analysts also caution yields are not at levels that should be alarming to investors, and in fact are at levels that signal a healthier global economy, and the performance of some stocks this week points to a belief the consumer is also getting healthier. The housing industry is solid and manufacturing is rebounding.

"As that gets more expensive it'll start to put more pressure on the stock market".

Economies around the world are strengthening and corporate profits are on the rise. The higher the RVOL the more In Play the stock is.

"Interest rates are rising", Hagensen said.

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The Dow Jones industrial average fell 4.15% to 23,860 points, just three days after falling 4.6% on Monday, setting it up to suffer its biggest weekly fall since October 2008 - the height of the global financial crisis. He said investors are now selling because they are afraid of bigger losses if they stand pat. What makes recent volatility seem so harsh is that wild swings had seemingly become rare, making investors of all ilk feel largely insulated from the uneasiness - if not financial harm - of such twists in market sentiment. The worry, he said, is that the Fed will raise interest rates too quickly.

Benchmark U.S. crude lost 64 cents to $60.51 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the global standards, lost 57 cents to $67.06 a barrel in London. The Dow is up 24 percent over that time, the S&P 500 18 percent.

CURRENCIES AND OIL: In currency markets, the dollar fell to 108.11 yen from Thursday's 108.84 yen.

European equities did not go unscathed with the Euro Stoxx 600 dropping 1.6% and the FTSE 100 down 1.5% yesterday.

Vimal Gor, head of income and fixed interest at BT Investment Management, said while history had taught him to be cautious of expecting any meaningful pick-up in inflation "until I see the whites of its eyes", fear of inflation could drive markets in the short-term. That also sent the pound higher.

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In Europe, Germany's DAX was down 2.1 percent and the CAC 40 in France lost 2 percent. Ten-year Treasury yields retreated from close to their four-year highs as stocks fell, while the yen found traction as a haven from the stock turmoil.