Dow drops another 500. It's the worst week for stocks since 2008

Dow drops another 500. It's the worst week for stocks since 2008

In the past two trading sessions, the Dow lost 7 percent, the S&P fell 6.1 percent and the Nasdaq declined 5.7 percent in what experts called it "a correction in the bull market" and said a pullback from record highs set last month was understandable.

The question now for investors, who have ridden a almost nine-year bull run, is whether this is the long-awaited pullback that paves the way for stocks to again keep rising after finding some value, or the start of a decline that leads to a bear market.

Steve Goldman, who heads the Goldman Management trading firm, said "the market had the sentiment where everybody was so bullish". "The psychology of the market changed today".

After the end of regular trading on Tuesday, S&P 500 e-mini futures were down 0.4 percent.

United States fund investors sucked US$23.9 billion (RM94 billion) out of the stock market in the latest week, marking the largest withdrawals from those funds on record, but bulls were still encouraged by strength in the global economy and solid USA corporate earnings.

"Those are all bond problems and ultimately those problems are going to cause a sell-off in the bond market", said Sanchez.

The U.S. stock market has climbed to record peaks since Trump's election on the prospect of tax cuts and corporate deregulation as well as optimism over corporate earnings. Trump has frequently taken credit for the rise of the stock market during his presidency, though the rally and economic recovery was well underway during the Obama administration.

So if the world economy keeps on growing, and it's business as usual, developed market tightening and a falling US dollar could be cushioned by emerging market demand. Unemployment is the lowest in 17 years, and the banking system has mostly healed. On the Nasdaq, 1,579 issues fell and 1,259 advanced.

The dollar index rose 0.76 per cent, with the euro down 0.82 per cent to $1.2275. At its low, the Dow was down 1,597 points, before buyers rushed in and limited the decline.

Traders have recently expressed worries that the Federal Reserve may be forced to raise interest rate by more than previously anticipated.

Alert For Investors: Starwood Property Trust, Inc. (STWD) trades in oversold zone
Among 10 analysts covering Starwood Property Trust Inc. (NYSE:STWD) has been 2.15 million shares per day over the past 30 days. Prudential reported 9.95 million shares or 0.8% of all its holdings. 31 funds opened positions while 52 raised stakes.

"You had a market that was overbought and ripe for something to undermine its tranquility", said Mark Luschini, chief investment strategist at Janney Capital. "We have an environment where interest rates are rising".

Yes, the Fed is tightening, and the tax cuts will result in higher short-term deficits, both putting pressure on Treasury yields. "You're seeing real changes occur and different investments are adjusting to that", O'Rourke said. The S&P 500 ended 6.2 percent below its January 26 peak.

The benchmark S&P 500 fell 5.2 per cent for the week, its biggest weekly percentage drop since January 2016.

Market experts also attributed the selloff, including the overnight slide in S&P 500 futures, to the violent unwind of a trade betting on volatility in USA stocks staying low as the CBOE Volatility index, known as the VIX, notched its biggest one-day jump on Monday in over two years.

Even with the sharp declines, stocks finished above their lows touched during the session. So if the economy did well, investors would buy stocks and sell bonds, and if there was risk on the horizon, they would sell stocks and buy bonds. Exchange-traded funds that focus on junk bonds suffered a third day of losses.

The yield on the US 10-year Treasury reached a four-year high of 2.885 percent earlier Thursday, while the 30-year bond yield climbed to a peak not seen since mid-March.

Trading volume of more than 12.3 billion shares marked the busiest trading day since just after the November 2016 election, and topped Monday's volume of 11.7 billion.

"The last thing anybody should do is overreact to traditional volatility", Guerrini said.

About 11.5 billion shares changed hands in US exchanges on Monday, well above the 7.6 billion daily average over the last 20 sessions. The Nasdaq, which closed at 6,777.16, closed about 20 points above its correction level.

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