Wall Street continued a broad selloff Monday, as the Dow plunged a record 1,175 points amid growing inflation fears.
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The Dow Jones Industrial Average closed at 24,345, down 4.6%. The S&P 500 fell 113 points, or 4.1%, to 2,648. The Nasdaq Composite dropped 273 points, or 3.78%, to 6,967.
The Dow fell as much as 1,597 points in afternoon trading, the largest intraday drop in history. The blue-chip index’s 4.6% decline reflected its worst day since at least Aug. 10, 2011. Coming off its worst week in two years, the Dow wiped out its 2018 gains with its pullback Monday.
The CBOE Volatility Index, known as the market’s “fear gauge,” soared 115% to its highest level since 2011.
Stocks have lost steam with investors refocusing on the potential for faster inflation growth. Job gains in January fueled those concerns, turning a spotlight on the Federal Reserve and its timeline for interest rate hikes. A stronger-than-expected gain of 200,000 U.S. jobs was seen as raising the odds that the central bank will increase its benchmark rate in March. The report also offered more evidence that the U.S. economy is gaining strength with wages climbing at their strongest pace since 2009.
A period of higher interest rates and stronger inflation would create a stark contrast to recent years, when accommodative monetary policies—headlined by near-zero interest rates—helped support the U.S. economy and equities.
But the business climate will remain a positive for the stock market after Monday’s selloff, according to Bob Doll, chief equity strategist at Nuveen Asset Management.
“This is technical, not fundamental,” Doll told FOX Business’ Liz Claman on “Countdown to the Closing Bell.” “This economic cycle is far from over.”
Jeff Carbone, managing partner for Cornerstone Wealth, said there was “no real impetuous” for Monday’s pullback
“The backdrop of the economy is strong corporate earnings, positive economic data and tax reform. The fundamentals have not changed,” Carbone said. “Investors have been looking for a catalyst to sell off, and rising interest rates [and] inflationary signs, along with concerns of the Washington memo, are in the spotlight.”
The yield on the benchmark 10-year Treasury note ticked lower to 2.74%, as traders moved from equities into bonds. Yields fall as prices rise.
The sharp drop in equities also drove a flight to gold, which gained 0.4% to $1,342 per troy ounce in late trading.
West Texas Intermediate oil dropped 2% to $64.15 a barrel.
Phil Flynn, senior market analyst at Price Futures group, said Monday’s market selloff was cathartic.
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“A lot of the stock market rally has been anticipatory,” he explained on “Countdown to the Closing Bell,” noting how traders bid up stocks in advance of tax reform and other business-friendly policies. Now, Flynn said the markets are asking, “What are you going to do for me next week?”
Greenberg Capital’s David Greenberg noted that there’s “more traffic on the way down” on Wall Street, driven in part by automated trading.
“There’s a tremendous amount of people that are going to be forced out of their positions at lower rates,” Greenberg said.
Carbone is advising clients to be proactive, not reactive, to the market, saying investors should remember that there is downside risk when investing.