Tuesday, February 06, 2018

Dow Whipsawed as Market Tumult Persists, Briefly Enters "Correction" Territory
Adam Shell, USA TODAY
3:05 p.m. ET Feb. 6, 2018

The Dow Jones industrial average plunged more than 1,100 points Monday as stocks took their worst loss in six and a half years. (Feb. 5) AP

(Photo: Richard Drew, AP)

It's been a day of wild price swings on Wall Street as the Dow Jones industrial average attempts to stabilize a day after its biggest one-day drop ever sent a wave of anxiety through global markets.

The 30-stock average initially fell more than 567 points, or 2.4%, at the open, briefly pushing it into "correction" territory after it fell 10% from its recent record high on Jan. 26.It then rebounded and recouped all of its losses and was up as much as 367 points.

At 12:45 p.m., the Dow was 200 points, or 0.8%, higher.

The market is trying to find a bottom after its recent freefall, says David Kotok, chief investment officer at Cumberland Advisors, a money management firm in Sarasota, Fla.

"Whipsaw markets must run their full course to completion," Kotok said.

It had been a swift, steep decline for U.S. stocks in a span of seven trading days since it hit its peak last month. The epic slide -- including Monday's  record 1,175-point Dow dive -- has quickly pushed the market down more than 10% for the first time in two years.

Wall Street, which has been shaken by the size and viciousness of the selloff, is still unsure of when the slide will end.

"The price action can certainly be called climactic," Chris Verrone, a technical market strategist at Strategas Research Partners in New York. While he "suspects we're getting closer to the end of this drawdown than the beginning," he says he's reluctant to say the market has hit a low enough level for buyers to step back in.

The recent bout of turbulence has been sparked by fears that interest rates and inflation will spike due the improvement in the economy. Selling has also been exacerbated by selling tied to trading strategies that were betting on market calm and low volatility continuing.

Market turbulence in the U.S. has caused a ripple effect across the globe. Stocks in Asia sold off sharply again Tuesday, with shares in Japan falling 4.7% and stocks in Hong Kong diving more than 5%. The selling spread to Europe, with a major index that tracks shares there tumbling 1.7%.

In a sign of rising investor anxiety, a closely watched Wall Street 'fear gauge," dubbed the VIX, which shot up more than 110% Monday to its highest level since August 2015, briefly rose another 30% today. And in another sign of investors turning defensive, money is flowing back into U.S. government bonds, pushing the yield, which spiked to a four-year high of 2.88% Friday, down to 2.76%

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