Published: Sat, February 10, 2018
Markets | By Noel Gibbs

FTSE 100 tumbles after record fall on Wall Street

FTSE 100 tumbles after record fall on Wall Street

Stocks swung from negative to positive after indexes started the session 2 percent lower, underscoring a return of volatility to a market that until recently was marked by an absence of major shifts.

Major U.S. indexes set their latest record highs just two weeks ago.

"Even though the epicentre of the sell-off appeared to be developments in the US, it is not surprising that South African equities have been hit hard too", said Oliver Jones, an economist at Capital Economics. The benchmark S&P/ASX200 index rose 13.9 points, or 0.24 per cent, to 5, 890.7 points while the broader All Ordinaries index lifted 13.7 points, or 0.23 per cent, to 5,995.2 points.

Bond prices fell slightly.

The question now for investors, who have ridden a almost nine-year bull run, is whether this is the long-awaited pullback that paves the way for stocks to again keep rising after finding some value, or the start of a decline that leads to a bear market.

The 10-year Treasury yield, which touched a four-year high of 2.88% on Thursday, is trading around 2.81% on Friday.

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United States crude fell 3.06 percent to $59.28 per barrel and Brent was last at $62.96, down 2.85 percent on the day.

Technology companies accounted for most of the broad gains, outweighing losses in energy stocks, which slumped as US crude prices declined, sending the price of oil below $60 a barrel for the first time this year.

Some of the market's biggest winners over the past year were leading the market higher.

The pullback came amid another spurt higher in Treasury bond yields, a focal point for investors concerned that the Fed may accelerate rate hikes if inflation rises suddenly.

The Dow Jones Industrial Average fell 132.73 points, or 0.56 percent, to 23,727.73, the S&P 500 lost 6.69 points, or 0.26 percent, to 2,574.31 and the Nasdaq Composite dropped 18.53 points, or 0.27 percent, to 6,758.63. Apple's guidance, for one, left a lot to be desired, while Alphabet's quarterly profit missed Wall Street's consensus.

The market's main gauge of volatility, the CBOE Volatility Index, fell to 26.74 on Thursday, still more than twice levels it held over the past few months.

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Bear markets are far less regular than corrections, and far more worrying.

European shares finished the day by falling 5.3 percent for the week, the biggest drop since January 2016. US stocks started to tumble last week after the Labor Department said workers' wages grew at a fast rate in January. The Dow is down 1.5 percent for the year.

The percentage of individual investors expecting stock prices to drop is at a three-month high of 35 percent, according to weekly survey results released Thursday by the American Association of Individual Investors.

Declining issues outnumbered advancing ones on the NYSE by a 8.64-to-1 ratio; on Nasdaq, a 6.92-to-1 ratio favored decliners.

The Russell 2000 is down 27.54 points, or 1.8 percent. It's still up 15 percent over the past year. Central banks respond to rising inflation by raising interest rates.

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