{"id":16656,"date":"2018-02-11T15:46:35","date_gmt":"2018-02-11T19:46:35","guid":{"rendered":"http:\/\/www.pgmcapital.com\/?p=16656"},"modified":"2018-02-11T15:46:35","modified_gmt":"2018-02-11T19:46:35","slug":"the-dow-plummeted-twice-more-than-1000-points-last-week","status":"publish","type":"post","link":"https:\/\/www.pgmcapital.com\/nl\/the-dow-plummeted-twice-more-than-1000-points-last-week\/","title":{"rendered":"The Dow plummeted twice more than 1,000 points last week"},"content":{"rendered":"

Dear PGM Capital blog readers,<\/p>\n

The Dow Jones plunged\u00a01,033 points on Thursday, February 8th, in another volatile day for the stock market. It was the second-worst single-day point drop in history,\u00a0beaten only\u00a0by the record set\u00a0after Monday\u2019s, February 5th, 1,175-point drop.<\/p>\n

INTRODUCTION:<\/h3>\n

The week of February 5, 2018, was a wild one for the stock market.<\/p>\n

Each of the major\u00a0U.S. averages lost more than 5%\u00a0with the Dow losing more than 1,000 points in a single day twice.\u00a0Despite a more than 1% rally to cap the week on Friday, February 9, the Dow, S&P 500, and Nasdaq, each lost approx. 5.2%, which made it the worst week for the US stock market, since January 2016.<\/p>\n

The Monday February 5 sell-off, was the largest point decline in the Dow\u2019s history as the\u00a0blue chip index shed 1,175 points, in a chaotic and disorienting trading day.<\/p>\n

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And by week\u2019s end, both investors and those not steeped in financial markets were left asking the same question.<\/p>\n

What just happened?<\/p>\n

WHAT TRIGGERED LAST WEEK SELL OFF?<\/h3>\n

Unlike declines around the debt ceiling in 2011, or concerns over the Chinese economy in 2015, or post-Brexit and post-election market sell-offs seen in 2016, there was no one thing you could point to and say,<\/p>\n

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\u201cThis\u00a0is what made markets go down.\u201d<\/p>\n<\/blockquote>\n

A number of factors were at play in markets last week, some of which seem more potent than others, and all of which contributed to the hectic trading. But the chaos seen in the week of February 5, really begun the week before.<\/p>\n

It all started with the USA January jobs report of Friday, 2, 2018, which showed that more jobs were added to the economy than expected during the first month of the year while wage growth was also stronger than expected.<\/p>\n

The post-jobs-report market stress continued into Monday, February 5, with the consequence that \u201chigher rates\u201d trade became the \u201chigher volatility\u201d trade.<\/p>\n

Increase of the treasury bond yield:<\/h4>\n

Treasury yields continue to move to multi-year highs, strong wage data was seen by many as confirming bond market fears that inflation is coming to the U.S. economy this year.<\/p>\n

The markets started to believe the Federal Reserve would have to be more aggressive in raising interest rates in 2018 and beyond.<\/p>\n

The increase in interest rates that had been seen since the start of 2018, all at once,\u00a0became a primary concern for the stock market.<\/p>\n

Spiking VIX Index:<\/h4>\n

The VIX index, which tracks current and expected market volatility, spiked higher as the week\u2019s first trading day drew to an end. In 2017, the VIX hit a record low of 8.64.<\/p>\n

On Monday, February 5, in the afternoon the VIX index was at 50, to close at 37.33 as can be seen from below chart.<\/p>\n

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When trading closed on Monday February 5, the stock market was down about 4% with the Dow falling 1,175 points and Treasuries did not prove to be the safe haven many expect them to be in a market storm.<\/p>\n

PGM CAPITAL ANALYSIS & COMMENTS:<\/h3>\n

After more than a year of steadily climbing, stocks spent the past six trading days all over the board.
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