The Dow Jones industrial average plunged more than 1,000 points as a weeklong market swoon continued.
The Dow is 10 per cent below the record high it set just two weeks ago, putting it in what is known on Wall Street as a “correction.” The Standard & Poor’s 500, the benchmark for many index funds, is also 10 per cent below the record high it set recently.
Worries about inflation set the market rout in motion last Friday, and many market watchers have been predicting a pullback after the market’s relentless march higher over the past year
The market fell steadily as Thursday wore on and is on track for its fifth loss in the last six days. Many of the companies that led the market’s gains over the last year have struggled badly in the last week. Those including technology companies, banks, and retailers and travel companies and homebuilders.
Stock trading turned volatile over the last several days, breaking an unusually long period of calm. European markets were also lower after the Bank of England said it could raise interest rates in the coming months.
After huge gains in the first weeks of this year, stocks tumbled Friday after the Labour Department said workers’ wages grew at a fast rate in January. That’s good for the economy, but investors worried it will hurt corporate profits and that rising wages are a sign of faster inflation. It could prompt the Federal Reserve to raise interest rates at a faster pace, which would act as a brake on the economy.
“Far and away the most important things are the fear that the Fed is going to make a mistake, and higher wages are going to cut into margins,” said Scott Wren, senior global equity strategist for Wells Fargo Investment Institute. The worry, he said, is that the Fed will raise interest rates too quickly.
The S&P 500 shed 100.58 points, or 3.75 per cent, to close at 2,581.08.
The Dow Jones industrial average lost 1,032 points, or four per cent, to finish at 23,860.46 . The Nasdaq composite fell 274.83 points, or 3.9 per cent, to 6,777.16.
Canadian stocks lower
On Bay Street, the S&P/TSX composite index closed at 15,065.55, dropping by 265.03 points or 1.73 per cent.
Eleven of the 12 subgroups closed lower, led by energy, losing 4.79 points, or 2.77 per cent, to 167.95 points. Gold was the lone advancer, adding 0.15 of a point, or 0.08 per cent, to 181.78 points.
On foreign exchange markets, the Canadian dollar was down by 0.16 of a cent at 79.42 cents US.
The price for light sweet crude for March settled at $61.15 US a barrel, down 64 cents from Wednesday’s close.
Tom Martin, senior portfolio manager with Globalt Investments, said he didn’t see anything specific moving the market lower today, just a continuation of a shift in investor mindset from fear of missing out in a rising market to worry of clocking big losses in a market that’s turned.
“This is going to take longer to work out than people expect,” he said. “In January we talked about fear of missing out. What we have now is what I call fear of getting caught.”