Wall Street enters correction territory as markets plunge

The materials group, which includes precious and base metals miners and fertilizer companies, lost 1.2 per cent. Japan's Nikken was off 4.73%, while China's Hang Seng Index fell more than 5%.

Volatility returned to markets on Thursday as United States indices finished the day sharply lower, plunging them into correction territory.

'It doesn't mean the bull market is over; it simply takes away some of the froth and irrational exuberance from stocks and puts us back on a more sustainable trendline.

In currency markets, the Canadian dollar closed at an average trading value of 79.46 cents USA, down 0.25 of a U.S. cent. "The market always has a tough time when things happen in a linear fashion". Investors are also facing the prospect of Fed tightening, which could cool growth.

The S&P energy index was up more than 0.4%, led by Anadarko Petroleum's 3.5% gain and an uptick in oil prices.

The sharp selloff in recent days was kicked off by concerns over rising inflation and bond yields, with investors pointing to additional pressure from the violent unwinding of trades linked to bets on volatility staying low.

U.S. investors are reacting to changes in the outlook for the American and global economy, and what that might mean for the cost of borrowing. Yields on 10-year treasuries again hit the highest level in four years, touching 2.9 per cent at one point though falling back to 2.84 per cent later in the session.

The S&P 500 index showed 2 new 52-week highs and no new lows, while the Nasdaq recorded 13 new highs and 21 new lows. The Nasdaq composite added 83 points, or 1.2 percent, to 6,861. Yesterday, it lost 4.1 per cent, which was its biggest daily percentage drop since August 2011.

The Dow closed down 666 points, or 2.5 percent - the largest percentage decline since the tumult surrounding Brexit in June 2016. It's 10.2% drop since its January 26 record high is its biggest since a 14.2% decline ending in February 2016.

After starting the year strong, last week was the worst week on Wall Street in two years, and the decline continued Monday.

USA stocks plunged anew yesterday in another trading session with big swings, as equities remained in a tug-of-war with bond yields, volatility remained high, and investors failed to see a bottom of the market ahead.

European markets also fell. The decline on Wall Street picked up steam on Monday, with the Dow plummeting 1,175 points. Brent crude, the benchmark for worldwide oil prices, rose 54 cents to $67.40 a barrel in London. "Whereas the USA dollar, the Japanese Yen are more of the safe-haven areas where you see investors flocking from the riskier assets". The euro dipped to $1.2251 from $1.2263.

USA markets have been under pressure all week, with the Dow notching its biggest loss ever in terms of points on Monday, rallying on Tuesday and finishing modestly lower Wednesday.

  • Eleanor Harrison