Dow closed down 666 points, or 2.5%, its biggest percentage decline
since the Brexit turmoil in June 2016 and steepest point decline
since the 2008 financial crisis.
strong jobs report showed wage
finally starting to pick up. That's great news for workers, but it
reinforced investors' concern about inflation and the bond market.
all about rates. Asset prices and the economy have become addicted to
low rates," said Peter Boockvar, chief investment officer at the
Bleakley Financial Group. "Sentiment got euphoric. There is more
froth that needs to be taken off."
sell-off knocked the Dow well below 26,000. Both the Dow and S&P
500 suffered their biggest weekly drops since early 2016 -- roughly
turmoil is adding to the uncertainty. Market analysts pointed to the
clash between the Trump administration and the FBI as another
looks like a breakdown of the institutions in our country," said
Ian Winer, head of equities at Wedbush Securities. "No matter
what side you're on, that's not good."
the point decline on the Dow was large, it paled in comparison with
the scary days of the financial crisis. Friday's decline was 2.5%.
The Dow plummeted nearly 8% on a single day in October 2008.
stock market is much calmer these days, thanks to a strong economy,
record corporate profits and the huge business tax cut enacted by
President Trump and Republicans in Congress.
with this week's slump, the S&P 500 is just 3.9% below its
the tranquility that has defined Wall Street's stunning rally since
the election has been punctured. The VIX (VIX),
a measure of market volatility, soared 55% this week.
jobs report didn't settle the market down. The economy added 200,000
jobs in January, and wages grew at the fastest pace in eight years.
if wages grow too fast, they could eat into Corporate America's
record profit margins.
other concern: Wage growth could be a sign that inflation, which has
been mysteriously low for years, may heat up. That would force the
Federal Reserve to raise interest rates faster than investors may be
worries are showing up in the bond market. The 10-year Treasury yield
reached a four-year high of 2.85% on Friday. It was at about 2.4% at
the start of the year.
investors are worried rates could climb high enough to slow the
economy by raising borrowing costs. They also worry that higher
returns on bonds will make stocks look less attractive by comparison.
rising rates are making it harder to say there is no alternative to
stocks," said David Kelly, chief global strategist at JPMorgan
Fed Chairman Alan
this week that both stocks and bonds are in a "bubble."
course, this week's slide does little to dent the overall gains the
market has achieved since President Trump's victory. The Dow and the
Nasdaq have climbed more than 40% apiece since the 2016 election. The
S&P 500 has advanced for 10 consecutive months. That hasn't
happened since 1959.
stock market bulls have long said that a pause -- or even a dip --
would help prevent the market from overheating.
just gone too far, too fast," said Art Hogan, chief market
strategist at B. Riley FBR."We
had this perfection of 2% higher every week -- and that really is
just not reality."
market analysts said the political controversy over the release of
the disputed GOP memo is rattling Wall Street. "You've got
trouble in the Department of Justice and the FBI at the senior
level," said Jeffrey Saut, chief investment strategist at
all hit when the market was ready to go down anyway. It just
accelerated it," Saut said.
Winer said the biggest risk is that Robert Mueller, the special
counsel investigating Russian interference in the election, is fired.
Bob Mueller is challenged in a firing, or a prelude to a firing, then
you're going to have a problem," he said.
market analysts think Friday's drop has little to do with Washington.
not drawing a connection between the political headlines and the
market. Valuations for stocks are high, and we were due for a
pullback," said Luke Tilley, chief economist for Wilmington
latest corporate earnings, which typically drive stock prices, left
the markets unimpressed.
of Google parent Alphabet (GOOGL) slumped
5% even after the tech behemoth posted its first $100 billion sales
year. Disappointing iPhone sales left Apple (AAPL) down
4%. ExxonMobil (XOM) sank
5% after its results widely
was widespread. Amazon was one of just 27 stocks in the S&P 500
to finish the day higher.
had a stock market that's gone absolutely crazy based on tax reform
juicing earnings," said Winer. "And numbers are coming in
that are OK, but not blowing the doors off."
question now is whether this market turmoil will persist into next
week, or whether investors have been waiting on the sidelines come in
to buy after the dip.
said his team expects there will finally be a full-blown correction
-- a 10% pullback from the recent highs.
don't expect a bear market unless there's an actual downturn in the
economy," Tilley added.