Dow sinks nearly 1600 points in worst one-day drop in history

Dow sinks nearly 1600 points in worst one-day drop in history

US stock futures pointed to a third day of losses at the opening on Tuesday, deepening a correction to the stock market's long-running rally that saw the biggest intraday fall in history for the Dow Jones Industrial Average on Monday.

A 1,175 drop in points may sound daunting but equates to only a 4.6 percent decline. The Nasdaq composite fell 181 points, or 2.5%, to 7,059.

WALL STREET: The S&P 500 fell 2.1 percent to close at 2,762.13. Treasury bond yields have risen sharply in recent weeks and the Federal Reserve is raising interest rates, which will raise borrowing costs for indebted companies and consumers.

Joel Prakken, chief USA economist for IHS Markit, predicts share price gains will be limited over the next two years.

It closed on Monday (5 February) by 1,175 points in the biggest fall since the financial crisis of 2008 when a $700bn rescue plan for the U.S. banking industry was rejected by Congress after the collapse of Lehman Brothers.

The wage data helped stoke investor concern that the Federal Reserve, the USA central bank, will respond to higher inflation by hiking its key interest rate more quickly than anticipated.

Currently, traders are pricing in three rate hikes for 2018, but if the economy and corporate earnings continue to improve, the chances of a fourth increase becomes more likely. Powell was sworn in Monday.

The VIX volatility index, nicknamed the Wall Street fear gauge, hit 37.32 on Monday, the highest level since the Chinese currency devaluation in August 2015. Real estate investment trusts are often seen as susceptible to rising bond yields, as investors typically hold them for a steady dividend yield rather than capital growth. Strong economic performance and prospects with the then-recent United States tax reforms had fuelled a bull market which saw the measure's value rocket up 1,000 points in 12 days. Nasdaq-100 futures eased 12.5 points, or 0.2%, to 6,406.50. Corcept plunged 22 percent.

Walt Disney, General Motors and Tesla will report quarterly results this week.

Falls were widespread in Europe, with Germany's Dax down 2.6% and France's Cac 3%.



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