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Wall Street rebounds but posts worst week in two years

Stock MarketsFeb 09, 2018 06:46PM ET
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© Reuters. A screen displays the tracking of the Dow Jones Industrial Average for the day's trading following the closing bell on at the New York Stock Exchange (NYSE) in Manhattan, New York

By Lewis Krauskopf

NEW YORK (Reuters) - U.S. stocks ended a wild week with a burst of buying, pushing the S&P 500 up 1.5 percent on Friday, but still recorded their worst week in two years, and investors braced for more volatile trading days ahead.

The sharp falls of the week confirmed the market was in a correction, down more than 10 percent from a Jan. 26 record high, and throwing the nearly nine-year bull market off course. The newly volatile market was shaken in part by rising bond yields, which led stock investors to rethink their positions after months of steady gains.

The S&P 500 ended the week nearly 9 percent below the all-time high set just two weeks ago.

“I don't see any reason to think that we're setting a pattern for next week or the rest of the year," said Rob Stein, chief executive officer of Astor Investment Management in Chicago. "The only pattern we're setting is more volatility."

On Friday alone, the S&P 500 swung from gains of up to 2.2 percent to declines of 1.9 percent, echoing the big swings of the past week. The Dow moved in a range of more than 1,000 points, a more modest change than on Monday when the Dow fell as much as nearly 1,600 points.

The Dow Jones Industrial Average (DJI) rose 330.44 points, or 1.38 percent, to 24,190.9, the S&P 500 (SPX) gained 38.55 points, or 1.49 percent, to 2,619.55, and the Nasdaq Composite (IXIC) added 97.33 points, or 1.44 percent, to 6,874.49.

Technology (SPLRCT) was the best-performing group on Friday, with Microsoft Corp (O:MSFT), Alphabet Inc (O:GOOGL) and Facebook Inc (O:FB) giving the biggest individual boosts to the S&P 500. Energy (SPNY) was the lone major S&P sector to end negative as oil prices tumbled.

(Graphic: S&P 500 Sector Performance - http://reut.rs/2Bk7XKJ)

The benchmark S&P 500 fell 5.2 percent for the week, its biggest weekly percentage drop since January 2016. For the week, the sector that got hammered the most was energy.

Ninety-six S&P 500 stocks are down 20 percent or more from their own one-year highs, according to Thomson Reuters data.

The sharp selloff in recent days was kicked off by concerns over rising inflation and bond yields, sparked by last week's January U.S. jobs report.

"You have a fundamental difference between the economy and earnings doing well, versus interest rates going up and inflation picking up, and it’s still a question of which will dominate," said Giri Cherukuri, head trader at OakBrook Investments LLC in Lisle, Illinois.

Equities for years have looked relatively attractive compared to the low yields offered by bonds, but the rise in Treasury yields has diminished the allure of stocks, especially with stock valuations at historically expensive levels.

The yield on benchmark 10-year U.S. Treasuries (US10YT=RR) hovered around 2.85 percent after touching a four-year peak of 2.885 percent on Monday.

“That’s part of this recalculation that has gone on in the market: How do we factor in higher bond yields?" said Willie Delwiche, investment strategist at Baird in Milwaukee. "And that is a process that is playing out."

U.S. fund investors sucked $23.9 billion out of the stock market in the latest week, marking the largest withdrawals from those funds on record, but bulls were still encouraged by strength in the global economy and solid U.S. corporate earnings.

Also, the percentage of Main Street investors expecting stocks to fall reached a three-month high in the American Association of Individual Investors' weekly survey.

(Graphic: Bearish sentiment among individual investors - http://reut.rs/2BkoI8t)

During Friday's session, the S&P 500 briefly broke below its 200-day moving average, a closely watched technical level, before rising.

"You will often see bounces off those levels," said Anwiti Bahuguna, senior portfolio manager at Columbia Threadneedle Investments in Boston.

The S&P 500 lost $2.49 trillion in market value from Jan. 26 through Thursday, according to S&P Dow Jones Indices.

Volatility remained high compared to recent months. The market's main gauge of volatility, the CBOE Volatility Index (VIX), fell 4.4 to 29.06 on Friday but was still nearly three times the average level of the past year.

In the latest day of strong trading volume, about 12 billion shares changed hands in U.S. exchanges on Friday, well above the 8.5 billion daily average over the last 20 sessions. It was the first time weekly volume eclipsed 50 billion since August 2015.

Advancing issues outnumbered declining ones on the NYSE by a 1.43-to-1 ratio; on Nasdaq, a 1.36-to-1 ratio favored advancers.

The S&P 500 posted no new 52-week highs and 47 new lows; the Nasdaq Composite recorded 17 new highs and 208 new lows.

Wall Street rebounds but posts worst week in two years
 

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Feb 09, 2018 1:23PM ET
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you cant time this mkt drop. so blah blah comments won't make you a dollar.
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Ronnie Smith
Ronnie Smith Feb 09, 2018 12:53PM ET
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Digital cash is KING
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Eloy Rodrigo
Eloy Rodrigo Feb 09, 2018 12:28PM ET
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No one can escape the 4 laws
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Real Flow
Real Flow Feb 09, 2018 12:28PM ET
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What is 4 laws?
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Feb 09, 2018 12:28PM ET
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Real Flow one of the four laws real is not to reply to t roll posts. eloy is goof. learn real,don't reply to this stuff.
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Eloy Rodrigo
Eloy Rodrigo Feb 09, 2018 12:28PM ET
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Search that frase
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WANDERLUST srt
WANDERLUST srt Feb 09, 2018 12:26PM ET
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OK so it corrected.  It will bottom, so far it has reached mid October 2017 levels, but that was only 4 months ago.  At this rate we have most of feb, march, april left.   Its entirely conceivable it will retest market highs in the strong months of march and april and possibly early may.  If not then definitely by july.  Average correction is like 15% or so but then recoups all losses in 4 months.
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Hemaraj A R
Hemaraj A R Feb 09, 2018 12:26PM ET
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Is it under correction due to bonds yield?
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Uma Mahesh
Uma Mahesh Feb 09, 2018 12:26PM ET
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21k possible..20993...
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WANDERLUST srt
WANDERLUST srt Feb 09, 2018 12:26PM ET
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Uma Mahesh anything is possible, but its not probable that it will fall that low.
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Aam Mic
Aam Mic Feb 09, 2018 12:22PM ET
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Nothing is mysterious this time. It is the end of cheap money, money is looking for better opportunities.
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Victor Delgado
Victor Delgado Feb 09, 2018 11:55AM ET
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What do you talking abouT ? fake news.. Dow negative many times on friday .
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Hussein Osman
Hussein Osman Feb 09, 2018 9:41AM ET
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Sentiment has changed, no one wants to be long this market, which was already a very un-loved rally.
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Jason Yahner
Jason Yahner Feb 09, 2018 9:41AM ET
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What rally is ever unloved?
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Hussein Osman
Hussein Osman Feb 09, 2018 9:41AM ET
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Jason Yahner ones that defy all comprehension, because when those ones go, they really go. And 23.8k is little different to 26.6k, so don't expect this one to be over just yet.
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Hussein Osman
Hussein Osman Feb 09, 2018 9:41AM ET
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I meant this correction isn't over just yet.
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