Stocks Are Plummeting, Erasing All the Gains They've Made in 2018
Feb 07 2018 by Kate Woods
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Corrections are seen as entirely normal during bull markets, and even helpful in removing speculative gains and allowing new investors to buy into the market at lower prices.
Earlier Tuesday, Asia's benchmark stock indexes collapsed, as Monday's massive selloffs on Wall Street rolled across the globe. The drop on Friday was the sixth-largest point drop in history.
Market expertssaid the selloff, including the overnight slide in S&P 500 futures, may have been magnified by the violent unwind of a trade betting on volatility in US stocks staying low as the CBOE Volatility index, known as the VIX, notched its biggest one-day jump on Monday in over two years.
That could be painful for markets that have been propped up by central banks' stimulus for many years. The Cboe Volatility Index, Wall Street's so-called fear gauge, jumped 104% to 35.02, its highest level since August 2015.
Trump has frequently touted the rise of the stock market during his presidency.
"We can not go straight up or straight down. we need both buyers and sellers to really pull and find the right place where our market should be at", said Jonathan Corpina, a trader at the New York Stock Exchange. "But the fundamentals of this economy are very strong". Yields move inversely to prices - so as investors sell bonds, yields rise, and vice versa.
The broader Standard & Poor's 500 index was down 5 points, or 0.2 percent, at 2,643. It started the year at 2.43 per cent.
Overall, the stock market lost $1 trillion in value in the first five days of February.
"The catalyst for the biggest USA equity sell-off for six years is being blamed on a delayed realization that inflation pressures are rising perhaps more quickly than anticipated", said James Knightley, economist at Dutch bank ING. The index had cut below its 50-day moving average in heavy trade Monday. Another remarked that the stock market "was overbought and ripe for something to undermine its tranquility".
In Tuesday's trading, high-dividend companies including utility and real estate companies fell, as bond yields increased after a sharp drop on Monday.
World stock markets suffered sharp losses this morning as a global selloff - rooted in fears of rising United States interest rates - showed no sign of abating. "I believe it's just a correction in the market", said Roti.
European equities hit a six-month low, with London and Paris indexes each down more than 2 per cent. Big euro zone markets are now negative for the year.