Markets closed in the red for a second consecutive session on Monday. Losses were triggered after investors speculated over a sudden spike in inflation and resultant rate hikes rate by the Fed. These fears in turns were generated by by stronger than expected jobs data. All the major benchmarks ended in the negative territory, with the Dow slumping more than 1,000 points. Meanwhile, Jerome Powell was sworn in as the new Chairman of the Fed. Finally, the ISM Services index hit a 13-year high on Monday.
The Dow Jones Industrial Average (DJI) decreased 4.6%, to close at 24,345.75. However, the S&P 500 fell 4.1% to close at 2,648.94. The tech-laden Nasdaq Composite Index closed at 6,967.53, losing 3.8%. The fear-gauge CBOE Volatility Index (VIX) increased 115.6% to close at 37.32 — its highest level since August 2015.
A total of around 11.5 billion shares were traded on Monday, lower than the last 20-session average of 7.6 billion shares. Decliners outnumbered advancers on the NYSE by an 8.64 -to-1 ratio. On Nasdaq, a 6.92-to-1 ratio favored declining issues.
Dow Suffers Record Loss
The Dow lost a staggering 1,175.21 points on Monday to close below 25,000, giving up all its gains for 2018. Further, this also marks its biggest drop in a single session, in terms of points since its inception. Such a decline was also the blue-chip index’s biggest percentage drop in a single day since August 2011.
Following the decline, the Dow is currently trading in the negative zone for the year. The blue-chip index initially fell more than 1,500 points earlier in the session and fluctuated more than 5,100 points throughout the day.
The S&P 500 dipped 113.2 points to end in negative territory. This marked its biggest percentage decline on a single day since Aug 18, 2011. With such a decline, the broader index is now trading in negative territory for 2018. The S&P 500 had gone an impressive 406 sessions without decline more than 5% — its longest such stretch in a span of 20 years.
All of the 11 major sectors of the S&P 500 ended in the red, with financials and healthcare stocks leading the decliners. The Financial Select Sector SPDR ETF (XLF) and the Health Care Select Sector SPDR ETF (XLV) declined 5.1% and 4.4%, respectively on Monday.
The Nasdaq plunged 273.4 points to end in the red. Losses for the tech-heavy index followed a dip in the tech sector. Shares of Apple (AAPL - Free Report) and Amazon (AMZN - Free Report) dipped 2.5% and 2.8%, respectively and weighed on the broader tech sector. For 2018, the index is up 0.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
What Led the Markets Lower?
Impressive figures from the Bureau of Labor Statistics regarding jobs in the U.S. led to a surge in interest rates, with the benchmark 10-year yield rising as much as 2.8%. Such an increase in interest rates weighed on investor sentiment and led to broad based losses for the markets. An increase in bond yields continued to lure investors away from equities.
However, yields fell to 2.7% after investors crowded into bonds later in the session. Moreover, an astounding growth in hourly and yearly wages in the U.S. gave rise to speculations regarding a possible spike in inflation and as a result a hike in interest rates by the Fed.
Jerome Powell was finally sworn in as the Chief of Fed on Monday as he replaced the outgoing Janet Yellen. Further, the Brooking Institution announced that Yellen would be joining ex Chief of Fed, Ben Bernanke at the Washington-based think-tank post the end of her tenure as the Fed Chairwoman.
The ISM Services Index surged to a 13-year high at 59.9% in January 2018. The consensus estimate for the period was 56.8%. A reading above 50 indicates expansion; however, a reading which surpasses 55% is regarded as bullish.
Stocks That Made Headlines
National Oilwell Posts Q4 Loss as Estimated, Sales Top
National Oilwell Varco, Inc. (NOV - Free Report) reported fourth-quarter 2017 adjusted loss per share, in line with the Zacks Consensus Estimate. (Read More)
How is Kroger Poised to Gain From Convenience Stores Sale?
Industry experts are of the opinion that competition in the U.S. grocery industry is going to intensify and supermarket chains will have to constantly revisit their strategy in order to withstand the same. (Read More)
Leggett Misses on Q4 Earnings & Sales, Guides for 2018
Leggett & Platt Inc. (LEG - Free Report) reported lower-than-expected sales and earnings for fourth-quarter 2017. (Read More)
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