Market rebounds after more wild trading, still loses 5% for the week
Wall Street rallied at the end of trading on Friday, ending the worst week in two years on a slightly positive note.
The Dow Jones industrial average gained 330 points, or 1.4 percent, to 24,190. Earlier in the day, it had dropped by 500. The S&P 500 gained 38 points.
Still, both the Dow and S&P 500 lost more than 5 percent for the week. Both indexes had their worst week since January 2016. The Dow recorded 1,000-point drops on Monday and Thursday.
The Standard & Poor's 500 index rose 1.5 percent, to close at 2,619. The Nasdaq rose 97 points, or 1.4 percent, to 6,874.
Bond prices fell. The yield on the 10-year Treasury note rose to 2.85 percent.
Stocks struggled to stabilize as investors sent prices climbing, then slumping in unsteady trading a day after the market entered its first correction in two years.
The up-and-down swings followed a drop of 10 percent from the latest record highs set by major U.S. indexes just two weeks ago. At midday, the market was on pace for its worst weekly tumble since October 2008, at the height of the financial crisis. By late afternoon, stocks had pared some of their losses but remained on course to add to the weeklong sell-off.
The Dow Jones industrial average briefly sank 500 points in afternoon trading after surging more than 349 points earlier in the day. The blue chip average suffered its second 1,000-point drop in a week on Thursday.
The Standard & Poor's 500 index, the benchmark for many index funds, also wavered between gains and losses.
As of Thursday, some $2.49 trillion in value had vanished from the index since its most recent peak on Jan. 26, according to S&P Dow Jones Indices.
"When you have an early morning rally in a decline of this nature, all that does is invite selling," said Bruce Bittles, chief investment strategist at Baird. "That's what we saw yesterday, and we know where that ended up."
Losses in restaurant chains, cruise lines, department stores and other consumer-focused companies outweighed gains in technology stocks and other sectors. Energy companies also fell as U.S. crude prices slumped, sending the price of oil below $60 a barrel for the first time this year.
Bond prices were little changed. The yield on the 10-year Treasury ticked up slightly to 2.85 percent.
The turbulence in U.S. stock indexes followed a broad slide in global markets.
In Europe, Germany's DAX fell 1.2 percent, while France's CAC 40 lost 1.4 percent. Britain's FTSE 100 shed 1.1 percent. Asian markets fell more sharply. Tokyo's Nikkei 225 lost 2.3 percent and Hong Kong's Hang Seng gave up 3.1 percent.
U.S. stocks started to tumble last week after the Labor Department said workers' wages grew at a fast rate in January.
Investors worried rising wages will hurt corporate profits and could signal an increase in inflation that could prompt the Federal Reserve to raise interest rates at a faster pace, putting a brake on the economy.
On Wall Street, many companies that rose the most over the last year have borne the brunt of the selling. Facebook and Boeing have both fallen sharply.
"Equities have traded in roller-coaster fashion all week, and today is no exception," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. "There's a fair amount of volatility in the market, and our belief is the volatility is leaving investors riddled with stress and uncertainty, which is likely to continue."
Financial analysts regard corrections as normal events but say the latest unusually abrupt plunge might have been triggered by a combination of events that rattled investors. Those include worries about a potential rise in U.S. inflation or interest rates and budget disputes in Washington.
The market, currently in its second-longest bull run of all time, had not seen a correction for two years, an unusually long time. Many market watchers have been predicting a pullback, saying stock prices have become too expensive relative to company earnings.
What many failed to predict, however, is the S&P 500's blazing slide from a record high on Jan. 26 to a drop of 10 percent on Thursday. That nine-day span represents the fastest correction for the index ever.
"We may have seen the worst, but it's too early to say for sure. However, our view remains that it's just another correction," said Shane Oliver of AMP Capital in a report.
Corrections of up to 15 percent "are normal," Oliver said.
"In the absence of recession, a deep bear market is unlikely," he said.
American employers are hiring at a healthy pace, with unemployment at a 17-year low of 4.1 percent. The housing industry is solid, and manufacturing is rebounding.
Major economies around the world are growing in tandem for the first time since the Great Recession, and corporate profits are on the rise. That combination usually carries stocks higher. But stock prices have climbed faster than profits in recent years.
Many investors justified that by pointing out that interest rates were low and few alternatives looked like better investments. Fast-rising interest rates would make that argument much less persuasive.
In currency markets, the dollar fell to 108.68 yen from Thursday's 108.84 yen. The euro dipped to $1.2229 from $1.2263.
Benchmark U.S. crude lost $1.95, or 3.2 percent, to settle at $59.20 per barrel on the New York Mercantile Exchange. Oil hasn't been below $60 a barrel since Dec. 28. Brent crude, used to price international oils, slid $2.02, or 3.1 percent, to close at $62.79 in London.
The price of gold declined $3.30, or 0.3 percent, to $1,315.70 an ounce. Silver lost 20 cents, or 1.2 percent, to $16.14 an ounce. Copper fell 5 cents to $3.03 a pound.