What it means that stocks are in a 'correction'

10 Febrero, 2018, 01:34 | Author: Arnold Perez
  • What it means that stocks are in a 'correction'

Investors anxious that rising wages will hurt corporate profits and could signal an increase in inflation that could prompt the Federal Reserve to raise interest rates at a faster pace, putting a brake on the economy.

The global sell-off began last week after a solid USA jobs report fuelled expectations that the Federal Reserve would need to raise interest rates faster than expected, because of the strength of the economy.

The wild ride on Wall Street continued Thursday with the Dow Jones Industrial Average plunging more than 1,000 points for the second time this week.

The S&P 500 shed 58 points, or 2.2 per cent, to 2,622 as of 3:10 p.m. It hasn't been that low since mid-November. The Nasdaq composite added 97.33 points, or 1.4 percent, to 6,874.49.

The losses were broad.

Stocks sank again Friday, with the Dow Jones industrials briefly falling 500 points, as the market heads for its worst week since the 2008 financial crisis.

Hanesbrands, which makes underwear, T-shirts and socks, reported a smaller profit than investors expected, and its forecast for the current year didn't live up to analysts' estimates either. The travel website's 2018 outlook also disappointed investors.

The S&P 500 gave up 44 points, or 1.7 percent, to 2,637.

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Other major stock indexes also dropped Thursday. GrubHub jumped $21.44, or 30.7 percent, to $91.34, while Yum Brands dipped $1.22, or 1.5 percent, to $78.91. Whether or not Fed policymakers come right out and say it when they next meet in March, and New York Fed President William Dudley's comments on Thursday suggest they probably will, the balance of economic risks has now clearly shifted to the upside, meaning the risk is that growth will come in too hot. That also sent the pound higher. Average hourly wages grew 2.9 percent from a year ago - the largest increase since 2009. Brent crude, used to price worldwide oils, slid $2.78, or 4.3 percent, to $62.03 in London.

Bond prices wobbled and turned higher.

Investors who are instead looking to take stock and reduce risk, perhaps fearing a more pronounced stock market correction, may want to consider a fund that prioritises capital preservation.

Earlier on Thursday, the 10-year US Treasury note yield rose as high as 2.884 percent, nearing Monday's four-year peak of 2.885 percent, after the Bank of England said interest rates probably needed to rise sooner than previously expected.

Wholesale gasoline remained at $1.77 a gallon.

In Europe, Germany's DAX fell 1.2 percent, while France's CAC 40 lost 1.4 percent.

Shares in French cosmetics group L'Oreal rose 0.3 percent after its fourth-quarter sales beat expectations and comments by its CEO regarding its intentions on Nestle's stake further buoyed the stock.

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