Published: Sat, February 10, 2018
Money | By Armando Alvarado

U.S. stocks close with solid gains after volatile session

U.S. stocks close with solid gains after volatile session

Bond yields are rising as the Federal Reserve trims its USA bond holdings.

The sharp moves this week have raised questions about how quickly investors would be willing to buy stocks at lower prices or stay cautious amid the threat of higher inflation.

Sure enough, bond yields hit a four-year high Thursday.

Elsewhere in Asia, Seoul's Kospi 1.8 percent to 2,363.77 and Sydney's S&P-ASX 200 lost 0.9 percent to 5,838.00.

With the latest drops, both the Dow and the broader S&P 500 are down more than 10 percent from their peaks on January 26, which constitutes a market correction.

During Friday's session alone, the S&P 500 swung from as high as up 1.5 percent to as low as down 1.9 percent, echoing the big swings of the past week.

The Dow finished with a decline of 1,033 points, the second-worst point drop in history, eclipsed only by Monday's 1,175-point nosedive.

By 12:54 p.m. ET it was down 1.7 percent on the day and 11.1 percent since highs hit on January 26.

The broad-based S&P 500 sank 3.8 per cent to 2,581.00, while the tech-rich Nasdaq Composite Index plunged 3.9 per cent to 6,777.16.

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Wall Street welcomed Wednesday's rebound before Thursday's significant drop.

Corrections are seen as entirely normal during bull markets, and even helpful in curbing excessive gains and allowing new investors to buy into the market at lower prices.

Traders are still braced for more volatility as they try to figure out if the swings of the past week are the start of a deeper correction or just a temporary blip in the U.S. market's nine-year bull run.

Stock markets around the world took a beating overnight, following the sell-off in the markets. The markets have been unusually calm since late 2016, and he said investors were betting that would continue. "People will be afraid now of shorting volatility".

But the suddenness of the correction still caused concern among traders and investors. The fear is that Treasury yields will rise to levels that make stocks less attractive and force the Federal Reserve to fight inflation by aggressively raising interest rates.

Some believe 3 per cent yields are inevitable because of demand and supply.

Stocks have also been on a tear because they have been one of the only investments with a decent return.

Also worrying investors was a government budget proposal announced by United States lawmakers, which raises spending caps and could fan inflation.

Worries about inflation set the market rout in motion last Friday, and many market watchers have been predicting a pullback after the market's relentless march higher over the past year. After that, trading isn't halted unless the S&P drops 20% - market crash territory. Chipmaker Nvidia added $14.56, or 6.7 percent, to $232.08.

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