United States markets turmoil: Why this is a correction and not a crash

United States markets turmoil: Why this is a correction and not a crash

United States markets turmoil: Why this is a correction and not a crash

US stocks plunged in highly volatile trading on Monday, with both the S&P 500 and Dow Industrials indices slumping more than 4.0 percent, as the Dow notched its biggest intraday decline in history with a almost 1,600-point drop and Wall Street erased its gains for the year. The benchmark S&P 500 and tech-heavy Nasdaq also snapped lower out of the gate. The market's main gauge of volatility, the CBOE Volatility Index, was at 30.5 points on Friday, down 3 from Thursday and well below the two-and-a-half-year high of 50.30 on Tuesday.

Friday's session marked the latest day of sharp swings in the past week that have pulled stocks lower after a steady climb for months to record highs.

"Even though the epicentre of the sell-off appeared to be developments in the US, it is not surprising that South African equities have been hit hard too", said Oliver Jones, an economist at Capital Economics.

Nicholas Colas, co-founder of DataTrek Research, doesn't think the sell-off will end until bond yields fall sharply.

The Dow Jones Industrial Average sank another 600 points on Thursday as a renewed rise in USA bond yields and fears of higher inflation unnerved investors still poring over a historic drop earlier this week. Yields for 10-year Treasurys hit four-year highs. Those include worries about a potential rise in USA inflation or interest rates and whether budget disputes in Washington might lead to another government shutdown. The surge in volatility on Monday, which sent the VIX spiking to multi-year highs in just hours, led to the implosion of products created to bet against volatility, exacerbating markets stresses in a rapid unwind.

"While volatility in the markets has eased over the last couple of days, it has remained at very high levels - probably a sign of the ongoing nervousness among investors which may leave markets vulnerable to further declines", Craig Erlam, senior market analyst at Oanda said in a note.

The stock market is on pace for its worst week since the 2008 financial crisis.

The Dow Jones Industrial Average dropped by around 1,033 points, or around 4.15 percent Thursday morning. The Nasdaq, which closed at 6,777.16, closed about 20 points above its correction level.

Some companies rose after reporting quarterly results and outlooks that beat Wall Street's forecasts.

The Dow Jones fell 1,032 points on Thursday, the second decline of more than 1,000 points for the index in a week.

Tyson Foods, rose 7.7 percent after the No. 1 US meat processor, reported better-than-expected quarterly results. Brent crude, the global standard for oil prices, gave up 70 cents, or 1.1 percent, to $64.81 per barrel in London. Britain's FTSE 100 shed 1.1 percent.

Some say the fluctuations are because of the good news, with fears that an overheated economy and nascent inflation will push the Federal Reserve to raise rates. Even after this week's losses, the S&P is up 12.5 percent over the past year. Trump has frequently taken credit for the rise of the stock market during his presidency, though the rally and economic recovery began during the Obama administration.

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