U.S. stocks enter correction territory after plummeting second time in a week

Global stock markets tumble after Wall Street battering

Stocks struggled to stabilize much of the day as investors sent prices climbing, then slumping in unsteady trading a day after the market entered its first correction in two years.

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.

Major indexes in Asia and Europe took steep losses and US markets started sharply lower, only to repeatedly change direction. After numerous turns higher and lower, it wound up with a gain, coincidentally, of 567.

In the foreign exchange market, the dollar was flat after earlier hitting two-week highs against a basket of major currencies as investors reduced bearish bets on the greenback. Retailers including Amazon and Home Depot made small gains, a possible sign of confidence the USA economy will keep growing. Those include worries about a potential rise in USA inflation or interest rates and budget deficits in Washington. The yield on benchmark 10-year U.S. Treasuries, the driver of global borrowing costs, was lingering at 2.846 percent, close to Monday's four-year high of 2.885 percent.

On Monday, February 5, 2018, the Dow plunged by nearly 1,600 points and this decline is the biggest decline in points seen in history.

On Monday, the Dow finished down 4.6 percent while the S&P 500 sank 4.1 percent, to 2,648.94. The Nasdaq composite rose 2.1 per cent to 7,115.88. A correction is not the same as a bear market, which is defined as when a stock index or individual stock falls 20 percent from its most-recent peak.

Corrections are seen as entirely normal during bull markets, and even helpful in removing speculative gains and allowing new investors to buy into the market at lower prices. Numerous companies that led the market's gains over the past year have struggled badly in the last week.

The market mood turned decidedly fearful the last two days.

While the market turbulence can be alarming, analysts urged investors to stay calm because the economic backdrop is strong.

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Wall Street slips into correction territory
What is a stock market correction? In small-caps, the Russell 2000 Index closed at 1,507.97 for a gain of 0.80 points or 0.05%. After starting the year strong, last week was the worst week on Wall Street in two years, and the decline continued Monday.

As well as the broader sell-off, analysts said stocks in China were weighed down by people selling ahead of the Lunar New Year holiday.

USA stocks swooned Friday and Monday as investors anxious that accelerating inflation and higher interest rates could derail the market's record-setting rally.

"The strong headlines job numbers and strong wage growth that we saw last Friday have really seen investors anxious about the threat of higher inflation and the prospect of higher interest rates in the USA", said Candice Bangsund, a vice-president and portfolio manager at Fiera Capital in Montreal.

New York Federal Reserve President Bill Dudley told Bloomberg News on Thursday that if the USA economy keeps getting stronger the central bank may be justified in raising rates four times this year.

Dallas Fed President Robert S. Kaplan said he did not expect the gyrations to have repercussions on the economy and described them as a "healthy" corrections from high valuations.

Do you think Dow Jones volatility can mirror that of cryptocurrency markets?

The seesaw day on the market came after the Asian and European markets both closed in negative territory.

After the sharp losses over the past three days, the S&P 500 is down 8.4 percent from the recent record high it set on January 26. On Tuesday it rallied another $5.57, or 15.6 percent, to $41.19. A key gauge of global stock indexes was down almost 1 percent.

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