Wall Street Plummets Again As S&P, Dow Confirm Correction

The indexes confirmed of ‘correction’ after both fell more than 10% from 26 January record highs.

Dow Jones stock index hit by record falls. Image used for representational purposes.

(Photo Courtesy: Xinhua/Wang Ying/IANS)

US stocks plunged on Thursday, 8 February, in another dramatic trading session, confirming a correction for the market that has thrown its nearly nine-year bull run off course.

The bottom of this recent slide remained elusive for investors, who have been whipsawed this week by huge swings that have shaken a market that had only climbed steadily for months.

With Thursday’s drops, the benchmark S&P 500 and the Dow industrials confirmed they were in correction territory, both falling more than 10 percent from 26 January record highs.

The S&P 500 slumped 3.8 percent on Thursday, while the Dow dropped 4.2 percent as losses accelerated late in the trading day.

The S&P 500 last confirmed a correction in January 2016, when it fell 13.3 percent amid concerns about a slump in oil prices.

The S&P closed below the intraday low it had hit on Tuesday, a key level traders had been watching.

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

“The dust hasn’t settled yet, and I think both buyers and sellers are trying to figure out what this market really wants to do,” said Jonathan Corpina, senior managing partner for Meridian Equity Partners in New York.

"I would think that this continues to happen for the next few trading sessions for everything to kind of get flushed out."

The retreat in equities had been long awaited by investors as the market climbed steadily to record high after record high with few bumps.

The sharp selloff in recent days was kicked off by concerns over rising inflation and bond yields, sparked by Friday’s January US jobs report, with investors pointing to additional pressure from the violent unwinding of trades linked to bets on volatility staying low.

Equities for years have looked relatively attractive compared to the low yields offered by bonds, but the rise in Treasury yields has diminished the lure of stocks, especially with stock valuations at historically expensive levels.

Earlier on Thursday, the 10-year US Treasury note yield rose as high as 2.884 percent, nearing Monday's four-year peak of 2.885 percent, after the Bank of England said interest rates probably needed to rise sooner than previously expected.

"What we're seeing today is continued concerns around interest rates going higher, around valuations in the stock market," said Chris Zaccarelli, chief investment officer with Independent Advisor Alliance in Charlotte, North Carolina.

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

All 11 major S&P sectors finished lower, with financials and technology the worst performing groups. All 30 components of the blue-chip Dow finished negative.

Investors are weighing whether the sharp swings this week are the start of a deeper correction or just a temporary bump in the prolonged bull market.

For the year, the S&P 500 is now down 3.5 percent. The percentage of US individual investors expecting a decline in stock prices has hit a three-month high, according to the American Association of Individual Investors' weekly sentiment survey.

The market's main gauge of volatility, the Cboe Volatility Index, rose 5.73 to 33.46 on Thursday, about three times the average level of the past year.

The number of Americans filing for unemployment benefits unexpectedly fell last week, dropping to its lowest in nearly 45 years as the labor market tightened further, bolstering expectations of faster wage growth this year.

In earnings news, Twitter rose 12.2 percent after the social media company delivered its first quarterly profit and an unexpected return to revenue growth. About 10.5 billion shares changed hands in US exchanges, well above the 8.2 billion daily average over the last 20 sessions.

Declining issues outnumbered advancing ones on the NYSE by an 8.26-to-1 ratio; on Nasdaq, a 5.58-to-1 ratio favored decliners. The S&P 500 posted no new 52-week highs and 32 new lows; the Nasdaq Composite recorded 24 new highs and 113 new lows.