- US stocks whipsawed on Wednesday as a volatile week of trading continued.
- After an unusual period of calm, volatility returned this week and wiped out all of the market’s gains for the year.
- Many strategists have urged clients to use the sell-off as an opportunity to buy stocks at lower prices.
It was another rocky day for stocks.
Volatility returned to the market this week after an unusual year without a decline of 5% or more from the previous record high. On Monday, the Dow Jones industrial average had a record intraday point drop. On a percentage basis, both the Dow and the benchmark S&P 500 saw their biggest one-day drop since August 2011, erasing their gains for the year.
But stocks fought back Tuesday, with the Dow closing up 567 points, or 2.3%. It rallied again Wednesday, but gave back its gains into the close. The index finished down 19 points, or -0.08%. The S&P 500 closed down 13 points, or -0.5%, after rising by as much as 0.7% earlier, and the Nasdaq finished down 63 points (-0.9%).
Most global markets that opened ahead of the US closed higher.
Treasurys rose during the worst of the sell-off as investors moved into the safer asset. They were lower on Wednesday, with the yield on the 10-year note, which moves in the opposite direction to its price, up 8 basis points at 2.845%.
The stock market started falling Friday after a stronger-than-expected report on wages sparked worries about a return of inflation to the US. It continued this week as a combination of computer-driven trading, withdrawals from exchange-traded funds that had bet on low volatility, and margin calls on investors who had bought stocks with debt all contributed to selling.
The market’s drop has investors trying to figure out whether this is primarily an overdue reversal after a stretch of low volatility and rising stocks. On the flip side, it could be the beginning of a steeper drop that ends in a bear market, though that’s not what most strategists are telling their clients.
What many are urging, instead, is to use this as an opportunity to buy stocks while they’re cheaper.
“Recently, we’ve been telling clients to slowly and methodically invest their cash as the sell-off unfolded,” Chris Harvey and Anna Han, equity analysts at Wells Fargo, said in a note on Wednesday. “Now, we’re telling clients that they’re free to trade (invest the balance of your cash). From here, we see almost 10% upside for the S&P500 and we believe all or most of that gain will transpire over the next 3-6 months.”
President Donald Trump weighed in on the sell-off on Twitter, saying it was a “big mistake” that the market fell on good news. The White House had said Monday that Trump was focused on the economy’s long-term prospects and raising workers’ wages.
In the “old days,” when good news was reported, the Stock Market would go up. Today, when good news is reported, the Stock Market goes down. Big mistake, and we have so much good (great) news about the economy!
— Donald J. Trump (@realDonaldTrump) February 7, 2018
Business Insider has been covering every angle of the sell-off: