Dow plunges over 1000 points, sinks into correction

Dow plunges over 1000 points, sinks into correction

It's a odd word, correction.

U.S. stocks overturned early losses to trade higher on Wednesday as some buyers returned to a market still shaking from a record fall for the Dow Jones Industrial Average earlier this week.

Is the entire stock market in a correction?

Numerous analysts have predicted that the volatility is set to continue over the next 12 months, as the US Federal Reserve continues to weigh the pros and cons of raising interest rates.

In fact, corrections are fairly common - they happen on average once a year on the Dow Jones, according to USA fund manager Grayeli Investment Management.

The last time the S&P 500 entered a correction was early 2016, and that came on the heels of another selloff in August of 2015. And it takes an average of just over another two years for the market to recover its lost ground.

As we typically see with these gut-wrenching events, the reasons for a market correction are complicated, multifaceted and normally include elements of surprise, emotion and human psychology.

Bulls argue that strong US corporate earnings, including a boost from the Trump administration's tax cuts, will ultimately support market valuations.

Equities for years have looked relatively attractive compared to the low yields offered by bonds, but the rise in Treasury yields has diminished the allure of stocks, especially with stock valuations at historically expensive levels.

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He says there will be an explanation on uniform arrangements, though it remains unclear if the Armani ensembles will be mandatory. Even Finance Minister Taro Aso, a descendant of a former aristocrat known for his dandy fashion, called the costs "pricey".

What else is adding to the drop?

On Wall Street, many companies that rose the most over the past year have borne the brunt of the selling. But stock prices have climbed faster than profits in recent years. The Dow Jones Small-Cap Value TSM Index closed at 9,835.97 for a loss of -5.20 points or -0.05%.

Thursday's market decline appeared once again tied to the increase in interest rates, with the 10-year Treasury yield touching 2.86% as investors continue to work out what a rising interest rate environment means for stocks after almost a decade of low, stable interest rates and low inflation.

Dallas Fed President Robert Kaplan said on Thursday the central bank could hike rates three times this year and the recent market volatility in itself was not enough to change his base scenario.

The 3 percent pullback Thursday across USA indexes is something that did not happen in all of 2017.

"One thing is that going into the last week or so, investor bullishness was in the top decile of its historical range, which suggests that investors were pretty optimistic, with high expectations and largely complacent", said Jack Ablin, chief investment officer with Cresset Wealth Advisors in Chicago. So, no, this ain't the end of the world.

The Nasdaq composite also reversed positively, although it did not touch its 200-day average.

The market's main gauge of volatility, the CBOE Volatility Index, fell to 26.74 on Thursday, still more than twice levels it held over the past few months.

Stocks began to fall in early trading and their losses grew throughout the day.

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