Turbulence returns to the stock market

Turbulence is making a comeback on Wall Street.The Dow opened with a 261-point leap on Wednesday, but those ga...

Posted: Feb 1, 2018 7:42 AM
Updated: Feb 1, 2018 7:42 AM

Turbulence is making a comeback on Wall Street.

The Dow opened with a 261-point leap on Wednesday, but those gains disappeared by afternoon.

The big reversal came after the Dow lost 540 points earlier this week, its worst two-day percentage drop since September 2016.

More signs of turbulence: The VIX volatility index has spiked 30% this week to a five-month high. And the S&P 500 broke a record streak without consecutive drops of 0.5%.

"It felt like an avalanche because we got accustomed to not seeing drops," said Andres Garcia-Amaya, CEO of wealth management firm Zoe Financial.

"I welcome some down days to shake out players who assume the market will go up forever," he said. "It doesn't."

It's hard to blame people for thinking that, though. By notching another month of gains in January, the Dow and S&P 500 are on track to extend their win streaks to 10. That hasn't happened since 1959.

Related: Wall Street's 'euphoric cabaret' can't last forever

One potential catalyst for the market reversal on Wednesday is that the bond market is showing signs of stress. The 10-year Treasury yield, which moves opposite the price, briefly climbed to 2.75% for the first time in nearly four years before retreating.

Higher bond yields over the past few weeks have unnerved investors, raising concern that the era of extremely low interest rates may soon be over. Significantly higher bond rates would act as a brake on the economy by increasing the cost of borrowing. They would also make risky stocks look less attractive compared with relatively safer bonds offering greater returns than they have been.

The bond selloff occurred after the Federal Reserve said it will "carefully monitor" inflation, which it expects to "move up this year." That could set the stage for the Fed to speed up its plans to raise rates. That decision will be left up to Jerome Powell, who is replacing Janet Yellen when she steps down as Fed chair this week. As expected, the Fed decided on Wednesday to keep interest rates steady.

Wall Street was reminded Wednesday that Corporate America is minting money. Boeing, easily the best Dow stock since the start of 2017, soared 5% after reporting record annual profits. The aerospace giant is optimistic about 2018 thanks to hefty demand for jetliners.

The economic backdrop continues to look positive. ADP said the United States created a better-than-expected 234,000 private-sector jobs in January. That could be a good sign ahead of Friday's more closely watched government jobs report.

Investors may be relieved at the measured tone Trump struck during the State of the Union address on Tuesday night. The president cheered the economic gains of the past year and called on Congress to produce a bill that generates at least $1.5 trillion for infrastructure investment.

On the other hand, Wall Street didn't love Trump's repeated vow to bring down drug prices. Drug stocks such as Eli Lilly and Merck slumped on Wednesday, while the iShares NASDAQ Biotechnology ETF retreated 2%.

Despite the drama in the market this week, Wall Street has enjoyed a robust start to 2018. The Dow's 6% jump in January would be its best month since March 2016. The Nasdaq is up 7%, its strongest month since October 2015.

Indiana Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 52037

Reported Deaths: 2762
CountyConfirmedDeaths
Marion12111693
Lake5677249
Elkhart366260
Allen2971134
St. Joseph221169
Hamilton1735101
Cass16489
Hendricks1470100
Johnson1351118
Porter84938
Vanderburgh8016
Tippecanoe7859
Clark71944
Madison68164
LaPorte62928
Howard61058
Bartholomew60545
Kosciusko5844
Marshall57011
Noble52428
Boone49244
LaGrange48710
Delaware48152
Jackson4793
Hancock47436
Shelby46025
Floyd41844
Monroe36128
Morgan34431
Grant32226
Dubois3196
Henry30318
Montgomery29720
Clinton2903
White27810
Dearborn27123
Warrick26829
Vigo2618
Decatur25732
Lawrence25325
Harrison21822
Greene19932
Miami1942
Jennings17912
Putnam1748
DeKalb1694
Scott1659
Wayne1596
Daviess15117
Perry15110
Steuben1402
Orange13823
Jasper1362
Ripley1357
Franklin1288
Gibson1282
Wabash1193
Carroll1142
Starke1093
Fayette1087
Whitley1086
Newton10110
Huntington942
Jefferson872
Wells831
Randolph804
Fulton761
Jay720
Knox710
Washington681
Pulaski661
Clay645
Posey640
Rush623
Spencer591
Owen531
Benton510
Sullivan511
Adams491
Brown441
Blackford402
Fountain362
Crawford330
Tipton331
Switzerland320
Parke280
Martin260
Ohio230
Vermillion200
Warren151
Union140
Pike120
Unassigned0193

Ohio Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 66853

Reported Deaths: 3064
CountyConfirmedDeaths
Franklin12301449
Cuyahoga9359399
Hamilton7046208
Lucas3079306
Marion275539
Montgomery257936
Summit2382209
Pickaway222942
Mahoning1971239
Butler189747
Columbiana139560
Stark1244116
Lorain118970
Trumbull106678
Warren101826
Clark82010
Delaware76315
Fairfield71917
Lake62723
Tuscarawas62110
Licking60012
Medina59932
Belmont57324
Clermont5157
Miami51431
Wood51051
Portage50960
Ashtabula45244
Geauga43143
Richland3906
Allen38541
Wayne37655
Greene3659
Mercer30410
Erie30122
Holmes2625
Darke26126
Huron2602
Madison2259
Ottawa21724
Athens1921
Sandusky17615
Ross1503
Washington14720
Putnam14515
Coshocton1434
Crawford1405
Jefferson1272
Morrow1271
Hardin12512
Union1151
Auglaize1124
Muskingum1061
Preble961
Lawrence920
Clinton912
Monroe8917
Hancock871
Hocking839
Guernsey824
Scioto770
Shelby774
Williams772
Carroll713
Logan711
Ashland692
Fulton680
Wyandot665
Brown621
Fayette580
Highland581
Champaign571
Knox571
Defiance553
Van Wert491
Perry481
Seneca442
Henry370
Paulding340
Jackson310
Pike290
Adams282
Vinton232
Gallia211
Noble140
Harrison131
Meigs130
Morgan120
Unassigned00
Fort Wayne
Clear
75° wxIcon
Hi: 85° Lo: 63°
Feels Like: 75°
Angola
Clear
68° wxIcon
Hi: 84° Lo: 63°
Feels Like: 68°
Huntington
Clear
70° wxIcon
Hi: 84° Lo: 62°
Feels Like: 70°
Decatur
Clear
70° wxIcon
Hi: 85° Lo: 64°
Feels Like: 70°
Van Wert
Clear
70° wxIcon
Hi: 87° Lo: 63°
Feels Like: 70°
Storms Late Wednesday
WFFT Radar
WFFT Temperatures
WFFT National

Community Events