Further losses predict on Wall Street

An investor monitors stock prices at a brokerage house in Beijing on Tuesday. | AP

United States stocks plunged in highly volatile trading on Monday, with both the S&P 500 and Dow Industrials indices slumping more than 4.0 percent, as the Dow notched its biggest intra-day decline in history with a almost 1,600-point drop and Wall Street erased its gains for the year.

Major indexes in Asia and Europe also fell following Monday's 1,175-point drop in the Dow Jones industrial average.

U.S. Treasury Secretary Steven Mnuchin said that recent volatility was not enough to rock market fundamentals. European indexes were down about 2 percent, while Japan's Nikkei lost 4.7 percent.

"We had an extreme sell-off followed by an extreme bounce", said Peter Kenny, an independent market strategist and founder of Kenny's Commentary. The Russell 2000 index of smaller-company stocks sank 56.18 points, or 3.6 percent, for 1,491.09. The Dow is up 23 percent over that time, the S&P 500 17 percent. The stock market has been unusually calm for more than a year.

US stocks fell in volatile trading on Tuesday, as a pullback from record highs steepened following the biggest one-day declines for the S&P 500 and Dow in more than six years.

In China, the Shanghai and Shenzhen bench marks closed down 3.3 and 4.2 percent, respectively, and the Nasdaq-style ChiNext index down 5.3 percent.

At its lowest, the Dow was down by 1,597 points from Friday's ending bell.

"The one thing I could say with confidence is that volatility has suddenly come back into the market", said Andre Bakhos, Managing Director at New Jersey-based New Vines Capital. The Standard & Poor's 500 index, the benchmark most professional investors and many index funds use, skidded 113.19 points, or 4.1 percent, to 2,648.94. It has been an uncommonly long time since the last market correction, which ended nearly two years ago.

The original trigger for the equity sell-off was a sharp rise in USA bond yields late last week, after data showed US wages increasing at the fastest pace since 2009.

People are reflected on an electronic stock indicator of a securities firm in Tokyo on Tuesday. | AP
People are reflected on an electronic stock indicator of a securities firm in Tokyo on Tuesday. | AP

The constant rise in USA share values since 2009 has been fuelled by the extraordinary easy-money policies of the world's major central banks, and most recently by President Donald Trump's tax cuts, promises of corporate deregulation and infrastructure spending.

He said if we do have inflation and higher interest rates borrowing could get more expensive and ultimately investors may pay a little more for a auto loan or mortgage.

USA crude fell 1.2 percent to settle at $63.39 a barrel, while Brent dropped 1.1 percent to settle at $66.86.

The volatility has been triggered by fears of rising inflation in the U.S. and a policy error from the Federal Reserve, which caused bond yields to widen to 2.73% on 29 January, the highest since April 2014.

While some Wall Street pros worry that stocks could be hurt more if the 10-year hits 3%, an analysis done by Credit Suisse equity strategist Jonathan Golub found that "rising rates are a positive for stocks until the 10-year hits 3.5%".

As of late Monday afternoon, the Dow Jones Industrial Average was down nearly 3 percent.

The Nasdaq composite added 84 points, or 1.2 percent, to 7,052. Industrial companies were also falling.

Copper lost 1.35 per cent to $7,072.50 a tonne.

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