Dow suffers biggest points loss in history, dropping 4.6 per cent and wiping out 2018 gains

The 1,175-point loss surpasses the previous worst drop of 778 points in September 2008, during the financial crisis 

PUBLISHED : Tuesday, 06 February, 2018, 5:05am
UPDATED : Tuesday, 06 February, 2018, 11:16am

The Dow suffered its biggest points loss in history on Monday as it dropped 1,579 points, then managed a meagre rally to close at 1,175 - wiping out all gains that had been made in 2018.

That beat the previous worst drop of 778 points in September 2008, during the financial crisis - although that slump was worse in terms of percentage loss.

The 4.6 per cent loss took the Dow industrials back below 25,000, as a pullback from record highs deepened and investors grappled with rising bond yields and potentially firming inflation.

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The S&P 500 also dropped sharply, ending the day down by 4 per cent.

The energy, financials and health care sectors fell the most, but declines were spread broadly as all major 11 S&P groups dropped.

During Monday’s session, the benchmark S&P 500’s fall on Monday put its pullback from its January 26 record high at more than 6 per cent.

“When you have rates moving upwards, typically what happens is that financial conditions tighten, things like bank lending, mortgage lending start to slow and then the economy is at risk of a potential downturn,” said Mona Mahajan, US investment strategist with Allianz Global Investors in New York.

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Although the Dow’s point loss is its biggest of all time, in percentage terms, its 5.6 per cent decline wasn’t as big as its worst drop during the financial crisis.

The market’s slump began on Friday as investors worried that creeping signs of higher inflation and interest rates could derail the market’s record-setting rally.

The slide Monday saw banks taking some of the biggest losses. Wells Fargo plunged 8 per cent after the Federal Reserve hit the bank with new sanctions over a scandal that involved opening millions of phoney consumer accounts.

The market is coming off its worst week in two years. Stocks fell sharply on Friday as traders worried about inflation and rising interest rates.

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The stock market slump came as US President Donald Trump visited swing state Ohio on Monday to promote the Republican tax overhaul and make the case ahead of the 2018 midterm elections that the policy is good for the middle class.

The tax cuts had “set off a tidal wave of good news” Trump said in a speech at Sheffer Corp., a manufacturing plant in Blue Ash, Ohio.

He cited a commitment Apple announced in January to invest US$350 billion in its US operations and also lauded bonuses some companies have given workers since the tax overhaul was passed.

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Friday’s jobs report sparked worries over the prospects for inflation and a surge in bond yields, as well as concerns the Federal Reserve will raise rates at a faster pace than expected.

Benchmark 10-year note yields pulled back after surging to 2.885 per cent overnight, the highest since January 2014.

Trump wants to keep highlighting companies that have doled out employee bonuses and cited the tax cuts as the reason, White House aides said.