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Wall Street tumbles to correction territory Dow drops by more than 1,000 points twice in week
(35 minutes later)
Wall Street shares slid sharply again on Thursday, thrusting the Dow Jones Industrial Average and S&P 500 into correction territory. Wall Street shares slid sharply again on Thursday, compounding losses on the Dow Jones Industrial Average and S&P 500 which started last week.
The Dow Jones Industrial Average fell by more than 1,000 points for the second time this week, plunging 4.15% plunge to 23,860. The Dow Jones Industrial Average fell by more than 1,000 points for the second time this week, plunging 4.15% to 23,860.
The S&P 500 dropped 100.58 points or 3.75% to 2,581, while the Nasdaq slid 274.8 points or 3.9% to 6,777.1.The S&P 500 dropped 100.58 points or 3.75% to 2,581, while the Nasdaq slid 274.8 points or 3.9% to 6,777.1.
The moves follow a day of losses on all key European exchanges.The moves follow a day of losses on all key European exchanges.
The 100 share index in London closed down 1.49% at 7,170.69 points. Germany and France fell 2.6% and 2% respectively.The 100 share index in London closed down 1.49% at 7,170.69 points. Germany and France fell 2.6% and 2% respectively.
Fears that a stronger global economy will push inflation and interest rates higher are again driving the falls. The dive extends a sell-off that started last week, as investors started to worry that inflation might rise more quickly than expected, leading policymakers to raise interest rates.
The Bank of England's latest policy meeting left interest rates where they were at 0.5% but said a strengthening economy meant interest rates were likely to rise sooner than the markets were expecting. On Thursday, the Bank of England seemed to offer support for that view.
Weekly jobless figures out in the US on Thursday showed claims for unemployment relief fell to their lowest level in nearly 45 years. The bank left interest rates where they were at 0.5% at its meeting, but said a strengthening economy meant interest rates were likely to rise sooner than the markets were expecting.
Thursday's sessions saw a return to the steep falls sparked around the world by positive news on employment and wages in the US at the end of last week. Also worrying markets was a government budget deal US lawmakers in Congress have announced, which raises spending caps and could fan inflation.
The declines have led to questions for President Donald Trump, who had repeatedly boasted of the market's rapid rise in value last year. Bond yields in the US have also risen in recent weeks, typically a signal of higher rates.
"The president like the rest of the White House is concerned about long term economic indicators and factors," a White House spokesman said. Higher interest rates push up borrowing costs for companies and individuals, which can hurt corporate profits and curb economic activity.
"The fundamentals in terms of the long term are very strong." At the same time, higher interest rates can make investment alternatives to stocks, such as bonds, more attractive.
Higher employment in theory means employers have to pay more to attract and retain the workers they want. Thursday's declines mean the Dow and S&P 500 have now fallen by more than 10% from the record highs set in January, a threshold analysts deem a correction.
Higher wages can allow higher inflation, which then requires higher interest rates to contain it. Shares in financial, technology and consumer companies led the declines on Thursday, which infected every sector. American Express and Intel were the two biggest losers on the Dow.
Most central banks have targets for inflation within which they are supposed to keep it contained. Analysts, who have said for months that the financial markets were due a correction after a long period of rising prices, urged calm.
Higher interest rates push up borrowing costs for companies and individuals. "The latest decline takes us back to where we were 17 November," said Greg McBride, chief financial analyst at Brankrate.com, which tracks interest rates.
Analysts have said for months that the financial markets were due a correction after a long period of rising prices. "We've just given back some recent gains, not wiped out anyone's life savings."
But the declines have led to questions for President Donald Trump, who had repeatedly boasted of the market's rapid rise in value last year.
"The president like the rest of the White House is concerned about long term economic indicators and factors," a White House spokesman said. "The fundamentals in terms of the long term are very strong."