Dow down 5% in last 4 days of trading

Stocks are getting smoked again.

After a wild start to the trading day that saw markets open deep in the red before rallying to turn positive, markets have fallen to new lows with the Dow off more than 560 points.

Near 2:30 p.m. ET, the Dow was off as many as 564 points, or 2.2%, while the S&P 500 was off 54 points, or 1.9% and the Nasdaq was down 102 points, or 1.4%. This slide has sent the Dow below the 25,000 milestone, which it eclipsed for the first time in early January.

Earlier in the day the averages, which opened sharply in the red, had clawed their way back into positive territory for a brief time before selling off again. Last week the markets endured their worst week since 2016 with the Dow and S&P 500 both losing over 2% on Friday.

Monday’s losses on the Dow are being led by Exxon Mobil (XOM), which is down over 4%, while drug giants Johnson & Johnson (JNJ), down 3%, and Pfizer (PFE), down 2.8%, were the next biggest losers. Only two members of the blue chip index were in the green in mid-afternoon trading.

The decline in stock market caught the attention of the Trump administration, which in a statement to CNBC’s Eamon Javers on Monday morning said, “We’re always concerned when the market loses any value, but we’re also confident in the economy’s fundamentals.”

The proximate cause of this latest market decline is the rise in Treasury yields this year that sent the benchmark 10-year yield to 2.85% last week, its highest level in four years. This comes just 18 months after the 10-year hit a record low. In afternoon trade on Monday, the 10-year was sitting near 2.81%.

Additionally, strong wage data last Friday from the Bureau of Labor Statistics saw markets brace for more aggressive interest rate hikes from the Federal Reserve in the year to come.


Low interest rates have, in part, been bolstering stock market valuations since the financial crisis. Back in October, Warren Buffett outlined why he still thought stocks were attractive given low Treasury yields. The 10-year yield is up 50 basis points since those comments.

Investors are also coming off a 15-month period following Donald Trump’s presidential election win in which markets were calm and returns were strong, and yet a creeping skepticism about the market had become a more common discussion among investors.

Yahoo Finance’s Dion Rabouin on Monday rounded up some of the common themes making investors nervous right now, which notably includes questions over whether cutting taxes at this stage in the economic recovery was a prudent move from the Trump administration. “The issue is, did tax reform kill the bull market or is tax reform a fiscal policy mistake? That’s what the market is struggling with,” Nicholas Colas, co-founder at DataTrek Research, told Yahoo Finance.

Still, most analysts expect that the recent decline in stocks will be short-lived given the solid economic and earnings fundamentals that have bolstered the case for owning stocks over the last year.

“We see last week as a reset in asset valuations with market expectations for rates moving closer to the Fed dots, not the start of a new correlation regime,” writes Keith Parker, a strategist at UBS. “When economic data surprises have been positive, equity pullbacks have averaged 5%, suggesting last week’s 4% selloff is close to an end. Selloffs have averaged 9% when data surprised have been very negative.”

In a note to clients published Sunday, Stephen Suttmeier, a technical analyst with Bank of America Merrill Lynch, said to “mind the downside gaps on the S&P 500. They are indisputable and resistance on rallies.”

Bespoke Investment Group highlighted in a note Monday morning that despite the downward pressure we’ve seen in the market over the last few trading sessions, S&P 500 futures are still not at their 50-day moving average. The 50-day moving average is an intermediate-term trend line for the market and large deviations from this level are expected to resolve back to the mean in time.

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Rough few days but still in the green overall.