The Dow Enters
Correction Territory

The stock market has seen its worst week in years — certainly since the financial crisis.

On Monday, January 29th, the Dow fell 177 points on the news of a rise in the 10-year treasury yield. That sparked concerns that the Federal Reserve would raise interest rates.

On Tuesday, January 30th, the Dow lost another 362 points.

On Friday, February 2nd, a strong wage earnings report was released, leading to an increase in interest rates by the Federal Reserve. The market response was severe. The Dow Jones industrial average dropped 666 points.

The following Monday, the fallout continued. The Dow plunged 1,175 points, and at one point during the afternoon was down as much as 1,579.

Other global stock indexes also dropped on Monday, including London’s FTSE and Japan’s Nikkei average.

And the swings continued. On Tuesday, the market recovered much of the loss, but on Wednesday dropped again. And on Thursday, the Dow dropped 1,034 points, losing a full 4% of its value. The S&P 500 lost 3.8%, and the Nasdaq lost 3.9%.

By the end of the week, the market was down 10% from its January high. We are now officially in “market correction” territory.

Analysts are saying the strong earnings report could lead to four interest rate hikes this year by the Federal Reserve. Many feel the $1.5 trillion tax cuts just passed by Congress is stimulating the economy too much too quickly, in addition to creating fears about its $1 trillion increase to the deficit (double that of 2017). There may also be skittishness in the market at losing the very successful Fed chair, Janet Yellin, who left her post on February 3rd when her job was not renewed by Donald Trump.

Some have suggested the big sell-off was due to program or robot trading.

President Donald Trump tweeted on Wednesday:  “Today, when good news is reported, the Stock Market goes down. Big mistake…”  

The Washington Post reported that the week erased 3 trillion dollars in U.S. stock market value. Analysts are predicting greater market volatility in 2018 than in 2017.

Ania Marti   (Cambridge, Massachusetts)


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