Stocks plunge, Dow loses more than 600 points

Stocks plunge, Dow loses more than 600 points

Stocks plunge, Dow loses more than 600 points

The Dow and S&P 500 suffered their worst week in two years, while the Nasdaq has not seen a week as bad since the early part of February of 2016.

"The dollar clearly needed support this week, and January's impressive United States jobs data has come to the rescue", said research analyst Lukman Otunuga at FXTM online currency brokerage.

Others have said US stocks were rising mostly on the economic growth that's been seen worldwide in the last two years, which also had sent foreign stocks higher.

The S&P 500 stocks had been trading at an average of between 18 and 20 times the forecasts of their underlying corporate earnings for the next 12 months, which was above their historical average of 15.5 but well below the price-earnings ratios seen in prior stock market bubbles that later collapsed.

Friday's plunge knocked the Dow to 25,520.96, a more than 2.5 percent loss from the previous session.

But what is really worrying investors is that the fuel behind this stock-market boom, namely cheap money from global central banks, may disappear sooner than they thought.

Rising bond yields also contributed the recent market volatility.

Friday's significant market dent comes after a week-long downwards spiral. Some investors saw a potential buying opportunity.

"It's a legitimate concern, when inflation spikes up a little bit, that people should evaluate how is this going to affect profits and how is this going to affect the Fed", said Mr Jonathan Golub, chief USA equity strategist at Credit Suisse. Meanwhile wages rose at the fastest pace in more than eight years, suggesting employers are competing more fiercely for workers.

President Donald Trump has repeatedly taken to Twitter to tout the stock market gains as a sign of his administration's success, and cited the Dow's gains in speeches and appearances.

The decline sent the Dow below the psychologically important level of 26,000, which it had just broken through for the first time two-and-a-half weeks ago. European bond yields also rose after the report came out.

Average hourly earnings for US workers were 2.9 percent higher in January than the previous year, the fastest annual increase in years.

Total nonfarm payroll employment increased by 200,000 in January, and the unemployment rate stayed unchanged at 4.1 per cent, stronger than market expectations, the US Bureau of Labor Statistics reported on Friday.

On Wednesday, the Federal Reserve left its benchmark interest rate unchanged at 1.25 to 1.5 percent after its two-day meeting, while giving an upbeat assessment of recent USA economic growth.

"A big wage growth number is the biggest risk to the stock market rally, because it means the Fed may get more aggressive in raising interest rates", says Invesco chief global market strategist Kristina Hooper.

Those predictions appeared to materialize Friday, with the 10-year Treasury note, a benchmark for many kinds of loans, including mortgages, climbing to 2.85%, the highest in about four years.

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