Dow drops more than 1,000 points, enters correction territory
The sense of dread that gripped equity markets earlier in the week suddenly re-emerged mid-Thursday as the Dow slid over 1,000 points on concern that rising interest rates will drag down economic growth.
Thursday’s 3.8% loss took the S&P 500’s decline since its Jan. 26 record past 10%, meeting the accepted definition of a correction. The Dow finished the day down by 1,032.89 points, or 4.15% at 23,849.23. Ten-year Treasury yields fluctuated near their four-year highs.
Traders remain on edge after the resurgent threat of inflation and higher bond yields had helped trigger the burst of volatility and a pullback across the overheated global equity market.
Bulls may have to question the wisdom of buying the dip when more selling by speculators may be imminent. This week’s Treasury auctions have underwhelmed, raising the prospect that the debt selloff could steepen. Investors are also facing the prospect of Fed tightening, which could cool growth.
“There’s some big-money players that have really leveraged to the low rates forever, and they have to unwind those trades,” said Doug Cote, chief market strategist at Voya Investment Management. “They could be in full panic mode right now.”