At its worst on Monday, the Dow was down more than 1,500 points.
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“The stock market has gone too far, too fast”, said James McBride, managing director of the McBride Group.
In other words, the current drop has not even hit “correction” territory yet, which is a 10% drop from market highs.
“People are not eager to buy stocks on a day like today”, Wayne Wicker, chief investment officer at ICMA Retirement Corp told The Washington Post.
A correction is less severe than a bear market, when stocks decline 20% from their recent highs.
Currency markets have been relatively quiet when compared to the action in equities and bonds, but expect the Yen to strengthen further, if stocks continue to plunge throughout the US trading session.
The most immediate reason is a fear of inflation.
The trigger for the sell-off was a sharp rise in U.S. bond yields following Friday’s data that showed United States wages increasing at the fastest pace since 2009, raising the alarm about higher inflation and with it potentially higher interest rates.
Torsten Slok, chief global economist at Deutsche Bank, told the Financial Times: “Markets are coming to the conclusion that the USA economy is close to overheating and therefore that the risks of inflation are bigger than the risks of a recession”.
“The market has become a much more unsafe place”, billionaire Carl Icahn told CNBC. Stocks were down about 2% in Britain, Germany and France. More selling followed, and voila, Bitcoin was trading with a 6-handle for a good part of the day. Perhaps it lulled you into saving more and investing more – just in time for the market to stumble a bit.
The wild swings Tuesday marked the third day of volatility in global markets.
At one point the Dow was down as much as 1,600 points.
Is this the worst decline ever?
But the end of trading on Monday has seen a shaky market tumble and fall as the Dow Jones makes a dramatic fall.
The S&P 500 and Dow both trade positive just 64 percent of the time a month after the S&P 500 sheds 5 percent in a six-day period, the data shows.
I keep hearing the term “circuit breaker”.
How does a circuit breaker work?
The biggest losses went to high-dividend companies including utility and real estate companies, as bond yields increased after a sharp drop on Monday. It was the busiest day of trading on the New York Stock Exchange since November 10, 2016, two days after the presidential election.
On Tuesday, Taiwan’s main index lost 5.0 percent, its biggest since in 2011 and Hong Kong’s Hang Seng Index dropped 4.2 percent.
Does all of this mean we’re entering a recession?
The late afternoon rally came after the market started off with a nose dive.
“Seemingly the only hope for the markets at the moment is that investors suddenly decide that the sell-off has been a bit overdone”, said Connor Campbell, a financial analyst at Spreadex.
Unemployment is at a 17-year low. Consumer and business confidence are near record levels.
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With Monday’s declines, the S&P 500 erased its gains for 2018 and is now down 0.9 percent in 2018.
