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

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

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

"I don't know if it's over, but a market range may be established".

What is a stock market correction?

This means that the market, at least based on the Dow, is in an official "correction", which is defined as a 10% drop or more.

Major indexes in Asia and Europe sank Tuesday and USA markets started sharply lower, zigzagging between gains and losses.

Hopes that Wall Street won't repeat the scale of Monday's losses helped limit the selling during European trading hours.

As a result, this isn't the "stock market crash" many are fearing.

The swoon began Friday as investors anxious that accelerating inflation and higher interest rates could derail the market's record-setting rally. That's great news for Main Street.

After huge gains over the course of 2017 and a January jobs report that showed significant wage increases, analysts became anxious the Federal Reserve would hike interest rates sooner than expected, causing market volatility as investors looked to lock in gains.

In emerging markets, the South African rand fell 0.7 per cent and the Chinese yuan and Polish zloty 0.2 per cent.

Overnight, world markets followed the United States' lead and dropped. Corporate earnings have never been higher, and USA and global economic growth has gathered momentum.

The Dow is still up 21 percent over the past 12 months, and the S&P 500 is up 15 percent.

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Futures markets priced in the risk of three, or even more, rate rises by the Federal Reserve this year. The Nasdaq Composite was down 0.9 percent at 7,051.98.

At one point Monday, the Dow fell almost 1,600 points.

"The mood on the floor is relief", said FTN Financial chief economist Chris Low, adding that the Dow's "violent" descent on Monday - at one point losing 700 points in a few minutes - would not soon be forgotten.

The decline appears to have been touched off by Friday's unemployment report, which showed that wages grew significantly in January. That sparked a global sell-off that continued on Monday. It's down 83.48 points, or 5.4 per cent, for the week.

Previous large one-day drops include several days during the financial crisis, and the first trading day after the September 11, 2001 terror attacks.

Monday's decline was 4.6%.

Every S&P sector posted losses, with financials (-4.3pc), technology (-4.3pc) and consumer cyclicals (-3.9pc) being the worst performers. The first such circuit breaker kicks in when the S&P 500 falls at least 7%, what's called level 1. The markets have been unusually calm since late 2016, and he said investors were betting that would continue.

How does a circuit breaker work?

'The Dow Jones Industrial Average has plummeted by more than 1,000 points, for the second time this week.

That would be a "Black Monday"-sized drop, which happened on October 19, 1987".

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