Published: Wed, February 07, 2018

The Dow Jones' Worst Point Decline in History

The Dow Jones' Worst Point Decline in History

The Dow Jones industrial average dropped more than 1,100 points Monday, erasing all its gains for the year.

The wild swings Tuesday marked the third day of volatility in global markets.

Both the S&P 500 and the Dow sank more than 4 percent on Monday, their biggest falls since August 2011, as concerns over rising USA interest rates and government bond yields hit record-high valuations of stocks.

"If investors look at underlying earnings growth and the fundamentals of the global economy, there is reason for optimism", said Neil Wilson, senior market analyst at ETX Capital.

Earlier on Tuesday, Japan's Nikkei 225 tumbled 4.7 per cent, marking its worst fall since November 2016 and taking it to a four-month low. In early trading Tuesday, the Dow Jones industrial average briefly fell 10 percent below its most recent record of 26,616.71 set on January 26.

The Dow ended the day down almost 1,200 points or 5 percent after shedding more than 660 points, or about 2.5 percent Friday. Nasdaq 100 e-minis were down 25.75 points, or 0.4 percent, on volume of 207,522 contracts.

The Dow Jones Industrial Average fell by nearly 1,600 points Monday on fears of rising inflation from a good economic outlook.

The slump began Friday as investors anxious that higher inflation and interest rates could derail the long-running rally. It was the largest point loss in history, although the index has suffered worse percentage losses in the past.

In Europe, Germany's DAX fell 2.3 percent and the CAC 40 in France lost 2.3 percent.

"Ironically, the timing of the tax cut coming so late in an economic expansion is what's causing a rise in interest rates", said Avallone. Bears, including short sellers that bet on the market decline, say that the market is over-stretched in the context of rising bond yields as central banks withdraw their easy money policies of recent years.

The plunge pushed stocks closer to what's called a correction, or a 10 per cent decline from their most recent high point.

Analysts are wary of that the fall is just a massive correction to a rally that goes back to 2008 financial crisis. This drop is the biggest since the day after the UK Brexit vote.

The S&P 500 posted 1 new 52-week highs and 38 new lows; the Nasdaq Composite recorded 17 new highs and 164 new lows. Earlier the biggest markets in Asian fell between 1% and 2.5%.

Asian markets, on the other hand, have benefitted from record low U.S. interest rates in the last decade because money has flowed into Asia in search of stronger returns. Boeing lost 2 percent and Caterpillar was down 1 percent.

Exxon Mobil fell 3.5 percent. Health care, technology and industrial companies all took outsize losses and energy companies sank with oil prices. The euro was up 0.4 percent at $1.2415 while the dollar rose 0.1 percent to 109.22 yen. The last fall of that size came in August 2011 when investors were fretting over Europe's debt crisis and the debt ceiling impasse in Washington that prompted a USA credit rating downgrade.

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