On Thursday, for the second time in a week, the Dow Jones Industrial Average lost over 1,000 points in a single session, closing at 23,860.46. The Dow plunged 4.15% as it lost 1,032 points. Concurrently, the benchmark S&P 500 dropped 3.75%, while Nasdaq plunged 3.9%.
On Monday, the Dow plummeted 1,175 points, the most ever for a single session, before it recovered on Tuesday and gained 560 points.
According to Bespoke Investment Group, the Dow and the S&P 500 are officially in correction territory, meaning they have dropped 10% from a recent peak.
The apparent culprit for Thursday’s loss was the increase in interest rates, a shift from the last 9-10 years of low interest rates.
Among Alphabet, Facebook, Microsoft, Amazon, and Apple, only Apple did better than the broad market on Thursday. The other four tech giants all plunged over 4.5%.
The VIX, which tracks market volatility, soared on Thursday, pointing to more volatility to come. Yahoo News stated, “Wrong-footed volatility bets, and not the notion that too much good economic news was rejected by financial markets, has become the dominating theory behind why markets tanked on Monday. The unsettled nature of markets since Monday shows investors have still not sorted out what this means going forward.
But Wall Street analysts think the drop is simply a correction from racing upward too quickly; James Barty at Bank of America Merrill Lynch wrote on Wednesday, “In our view markets had gone too far too fast two weeks ago and the correction is merely an unwind of very overbought conditions.”
And there were efforts to separate the wheat from the chaff when such a drop occurs in order to caution people not to jump to conclusions: