The major domestic equity indexes ended the trading day on Thursday, deep into negative territory as the markets faced another trading session with big swings,
The benchmark S&P 500 chalked up a second day of declines, following sharp swings in recent sessions including its biggest drop in more than six years that pulled equities away from record highs.
The bottom of this recent slide remained elusive for investors, who have been whipsawed this week by huge swings that have shaken a market that had only climbed steadily for months.
With the decline on Thursday, the benchmark S&P 500 and the Dow Jones Industrial Average confirmed they were in correction territory, both falling more than 10 percent from Jan. 26 record highs. The S&P 500 slumped 3.8 percent on Thursday, while the Dow dropped 4.2 percent as losses accelerated late in the trading day.
The S&P 500 last confirmed a correction in January 2016, when it fell 13.3 percent amid concerns about a slump in oil prices.
The retreat in equities had been long awaited by investors as the market climbed to record high after record high with few bumps. The S&P correction is the fifth of this bull market. The last bear market was during the 2008 financial crisis.
The sharp selloff in recent days was kicked off by concerns over rising inflation and bond yields, sparked by Friday’s January jobs report, with additional pressure from the violent unwinding of trades linked to bets on volatility staying low.
Equities for years have looked relatively attractive compared to the low yields offered by bonds, but the rise in Treasury yields has diminished the allure of stocks, especially with stock valuations at historically expensive levels.
All 11 major S&P sectors finished lower, with financials and technology the worst-performing groups. All 30 components of the Dow finished negative.
Amazon and Facebook, two of the big stocks that had led the S&P’s rally over the past year, were among the biggest drags on Thursday.
Thursday’s slide put the S&P 500 back into negative territory for the year, down 3.5 percent. The retreat in equities had been long awaited by investors as the market climbed steadily to record highs.
Financials and consumer discretionary sectors were among the worst hit, while utilities were the lone major S&P sector in positive territory.
Investors are weighing whether the sharp swings this week are the start of a deeper correction or just a temporary bump in the nine-year bull market.
The percentage of individual investors expecting a decline in stock prices is at a three-month high, according to the latest AAII Sentiment Survey.
The market’s main gauge of volatility, the CBOE Volatility Index rose 4.20 to 31.93 on Thursday, nearly three times the average level of the past year.
The number of Americans filing for unemployment benefits unexpectedly fell last week, dropping to its lowest level in nearly 45 years as the labor market tightened further, bolstering expectations of faster wage growth this year.
Thursday marked another session this week with strong volume. About 10.6 billion shares changed hands in U.S. exchanges, well above the 8.2 billion daily average over the last 20 sessions.
Unemployment Claims at 45-Year Low
The number of Americans filing for unemployment benefits hit its lowest level in nearly 45 years as the labor market continued to tighten. One likely result is expectations of faster wage growth this year.
According to a Labor Department report released Thursday morning, initial claims for state unemployment benefits fell by 9,000 claims to seasonally adjusted 221,000 claims for the week ended Feb. 3. Claims fell to 216,000 in mid-January, which was the lowest level since January 1973.
Last week marked the 153rd straight week that claims remained below the 300,000 number, which is associated with a strong labor market. That is the longest such stretch since 1970, when the labor market was much smaller.
The labor market is near full employment, with the jobless rate at a 17-year low of 4.1 percent. The tighter labor market is starting to exert upward pressure on wage growth.
The Labor Department reported last week that average hourly earnings jumped 2.9 percent year-on-year in January, the largest gain since June 2009, after advancing 2.7 percent in December.
Strong wage growth supports optimism among Fed officials that inflation will increase toward its 2 percent target this year.
The Fed has forecast three rate increases for this year, but much will depend on the inflation outlook and financial conditions. The central bank lifted borrowing costs three times in 2017.
The Labor Department said claims for Maine were estimated last week. It also said claims-taking procedures in Puerto Rico and the Virgin Islands had still not returned to normal months after the territories were slammed by Hurricanes Irma and Maria.
Last week, the four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, declined 10,000 to 224,500, the lowest level since March 1973.
The claims report also showed the number of people receiving benefits after an initial week of aid fell 33,000 to 1.92 million in the week ended Jan. 27. The four-week moving average of the so-called continuing claims rose 12,500 to 1.95 million.