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Inflation fears spur massive stock selloff

China Daily USA | Updated: 2018-02-06 12:15
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US stocks plunged in highly volatile trading on Monday, with the Dow Jones Industrial Average falling nearly 1,600 points during the session, its biggest intraday decline in history, as investors grappled with rising bond yields and potentially firming inflation.

The benchmark S&P 500 and the Dow suffered their biggest percentage drops since August 2011, as a long-awaited pullback from record highs deepened.

The financial, healthcare and industrial sectors fell the most, but declines were spread broadly as all major 11 S&P groups dropped at least 1.7 percent. All 30 of the blue-chip Dow industrial components finished negative.

With Monday's declines, the S&P 500 erased its gains for 2018 and is now down 0.9 percent in 2018.

Monday also saw the swearing in of the new Federal Reserve chairman, Jerome Powell, who will succeed Janet Yellen.

"Through our decisions on monetary policy, we will support continued economic growth, a healthy job market and price stability," Powell, 65, said in a video on the Fed's website.

Many investors have been bracing for a pullback for months, as the stock market has minted record high after record high, with investors encouraged by solid economic data and corporate earnings prospects, the latter bolstered by recently passed US corporate tax cuts.

Friday's January jobs report sparked worries over inflation and a surge in bond yields, as well as concerns that the Federal Reserve will raise rates at a faster pace than expected.

"The market has had an incredible run," said Michael O'Rourke, chief market strategist at Jones Trading in Greenwich, Connecticut. "We have an environment where interest rates are rising. We have a stronger economy so the Fed should continue to tighten. ... You're seeing real changes occur and different investments are adjusting to that."

The Dow fell 1,175.21 points, or 4.6 percent, to 24,345.75, the S&P 500 lost 113.19 points, or 4.10 percent, to 2,648.94 and the Nasdaq Composite dropped 273.42 points, or 3.78 percent, to 6,967.53.

Reuters

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