Equity markets drop amid continued choppiness, bond yields dip


Major indexes in Asia and Europe fell following Monday's 1,175-point drop in the Dow Jones industrial average.

On Thursday, the yield on the 10-year Treasury note again ticked up to a recent four-year high of 2.88%, sparking fears that rates could quickly top the key 3% level. His promises for big corporate tax cuts helped lift the Dow more than 8,000 points, though it has since given back about a fifth of that surge. It's switched between gains and losses several times since then.

Since January 26, the S&P 500 has lost $2.49 trillion in market value, according to S&P Dow Jones Indices.

It was only a couple weeks ago that America's Dow Jones and S&P indexes were at record highs.

A little history: On Oct. 19, 1987 (during my first year as an investment adviser), the Dow industrials experienced a fall of over 500 points - more than 20 percent in one day. The broader S&P 500 index rose 1%, having fallen 3.8% yesterday.

With the latest drops, both the Dow and the broader S&P 500 are down more than 10 percent from their peaks on January 26, which constitutes a market correction. Because pullbacks and corrections are actually extremely common on Wall Street.

But the declines have led to questions for President Donald Trump, who had repeatedly boasted of the market's rapid rise in value previous year. That meant Tuesday was likely to be one of the most watched days on the markets in years.

Shares in financial, technology and consumer companies led the declines on Thursday, which infected every sector. The yield on the 10-year note was as low as 2.04 percent as recently as September.

'While this continued optimism about how the USA economy is likely to perform is a good thing, for United States stocks whose valuations are still at elevated levels, they may not be particularly good news given that yield differentials are no longer working in their favour, unlike in Europe where dividend yields are still higher than the yield on government debt, ' said Hewson.

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By comparison, it usually takes stocks more than two years to bounce back from bear market and almost six years to recoup all the losses from a "mega bear", like the 2007-2009 downturn amid the financial crisis and the 2000-2002 tech wreck. That's because it takes a recession to simultaneously damage both the valuations multiples and earnings growth of businesses, says Paul Eitelman, a strategist at Russell Investments.

Global financial markets were a lot calmer Wednesday.

Investors are prepared for more volatility as they try to decipher if this is just temporary or a deeper correction will take place. For many traders, that was a sign that the Fed will have to pick up the pace of its rate hikes — higher wages have the capacity to fuel inflation.

After a sharp loss Wednesday, benchmark USA crude lost 64 cents, or 1 percent, to $61.15 a barrel in NY.

The Standard & Poor's 500 index gave up 77 points, or 2.9 percent, to 2,603.

In other commodities trading, wholesale gasoline remained at $1.77 a gallon. The latest inflation figures are anemic at 1.7 percent.

Volatility was evident Wednesday across financial markets.

The FTSE 100 was also buoyed by a fall in the pound, trading 0.8% lower against the dollar at $1.381, after the European Union's Brexit negotiator Michel Barnier warned a transition period was not a done deal.

Among the biggest losers Tuesday was Tokyo's Nikkei 225 stock average, which ended 4.7 percent lower.