United States stocks enter correction territory after plummeting second time in a week

United States stocks enter correction territory after plummeting second time in a week

The VIX on Tuesday hit a more than two-and-a-half year high above 50, after trading, on average, below 20 for months.

The Dow Jones industrial average tipped 1,032 points into the red, down 4.2 percent, to close at 23,860 as fears deepened over rising interest rates.

The drop in bond prices and the subsequent rise in yields have kept equity investors nervous about higher interest rates and inflation. The broad market S&P 500 finished down 101 points, at 2,581. The Dow moved almost 500 points during trading on Wednesday before closing down 19 points, or 0.08 per cent, at 24,893.

The Dow Jones Industrial Average fell 762.23 points, or 3.06 percent, to 24,131.12, the S&P 500 lost 72.46 points, or 2.70 percent, to 2,609.2 and the Nasdaq Composite dropped 202.47 points, or 2.87 percent, to 6,849.52.

The S&P 500 also went up by 1 percent or 27 points to 2,676 points. If RVOL is less than 1 it is not In Play on this trading day and Investors may decide not to trade it. It's switched between gains and losses several times since then.

Elsewhere in Asia on Friday, Hong Kong's Hang Seng pulled back 3.7%, while South Korea's Kospi index traded down 1.6% and Australia's S&P/ASX 200 eased 0.8%. That means they are in what is known on Wall Street as a "correction", their first in nearly two years. But a steady climb that lasted more than a year has given way to two weeks of shaky selling.

Robert Thomas has over 14 years experience in the financial services industry giving him a vast understanding of how news affects the financial markets. At about 2.83 percent Friday, Treasury 10-year yields are near their highs of the year, having risen from last year's low of 2.01 percent in early September.

The steep declines spooked stock investors who yanked a record $30 billion out of stock funds in the week ended February 7, according to EPFR Global. 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.

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This global sell-off began last week after a solid United States jobs report fuelled expectations that the Federal Reserve would need to raise interest rates faster than expected because of the strength of the economy. A pickup in inflation could prompt the Federal Reserve to raise interest rates at a faster pace, which would act as a brake on the economy.

"While today would be crucial in seeing if the bulls can wrestle back control for Asian markets, it does appear that we have finally entered a period of increased volatility", says Jingyi Pan, market strategist at IG in Singapore.

"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.

Analysts suggest that Monday's rout was caused by fears that the era of cheap money was drawing to a close with renewed inflationary pressures.

Schutte, of Northwestern Mutual, added that corrections can end quickly, and they often do so when investors see evidence of continued economic growth. Experts do think the global economy will keep growing this year even though that is likely to bring more inflation.

The Canadian dollar was trading lower by 0.26 of a cent at 79.32 cents US.

USA crude oil dropped 1 percent to settle at $61.15 a barrel, while Brent fell 1.1 percent to $64.81.

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