Dow rises 350, erasing an early plunge

MARKET UPDATE | Dow swings begin; down 130 after 30 minutes

UPDATE: Dow rises 350, erasing an early plunge

Although lower than the two-and-a-half-year high of 50.30 points hit on Tuesday, it is still triple than what it was just a week ago.

Japanese and Korean benchmarks were recouping losses from the day before in early Wednesday trading, mirroring a similar "correction" rally on Wall Street.

"At this point a lot of it is about risk assets", said Ian Lyngen, head of United States rates strategy at BMO Capital Markets in NY. "We've all enjoyed it", said Rich Guerrini, CEO of PNC Investments.

The up-and-down trading Friday came a day after the market entered its first correction in two years. "Whereas the USA dollar, the Japanese Yen are more of the safe-haven areas where you see investors flocking from the riskier assets". The breakdown of stock markets has increased the worries of increasing inflation and interest rates. That's good for the economy, but investors anxious it will hurt corporate profits and that rising wages are a sign of faster inflation.

"That is not to say that we won't see further falls in coming days, but in an environment where growth is good and earnings are expected to rise globally, there are decent underpinnings", said James Knightley, chief worldwide economist at ING.

Few big companies emerged unscathed, with Dow giants Boeing and Caterpillar losing around 5 per cent, around the same range as tech titans Amazon and Facebook. The Standard & Poor's 500 index, a broader market barometer that many index funds track, climbed 25 points, or 1 percent, to 2,674. The Dow is still up 20 percent over that time, the S&P 500 15 percent.

The S&P 500 gave up 100 points, or 3.8 percent, to 2,581.

While those concerns have been the catalyst for recent selling, the retreat in equities had been long awaited by investors as the market climbed nearly steadily to record highs earlier this year.

Though many stock indexes are close to where they started the year, the losses mark a reversal of fortune following a sustained period of gains, a pullback that some market pros have been predicting for some time.

American employers are hiring at a healthy pace, with unemployment at a 17-year low of 4.1 percent.

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"This has been the most overbought situation since the financial crisis 10 years back", he said.

"When the market declines sharply, everyone naturally wonders, 'What's wrong?' Nothing is wrong economically", said Greg McBride, chief financial analyst for Bankrate.com, according to NBC News. Accelerating inflation may crimp corporate profits. The higher the RVOL the more In Play the stock is.

At the same time, higher interest rates can make investment alternatives to stocks, such as bonds, more attractive.

U.S. markets have been under pressure all week, with the Dow notching its biggest loss ever in terms of points on Monday, rallying on Tuesday and finishing modestly lower Wednesday.

"What's driving this downturn in the stock market is actually emanating from the bond market", Sanchez told "Trading Nation" on Thursday.

Throughout the turbulence, investors bought companies that do well when economic growth is strongest. Numerous companies that led the market's gains over the past year have struggled badly in the last week.

"This is going to take longer to work out than people expect", he said. The rebound followed on from the Dow Jones and S&P 500 indices recording their biggest one-day percentage falls in over six years in Monday's session (5 February). The Nasdaq was up 48 points, or 0.7 percent, to 6,825.

The dollar fell to 109.20 yen from 109.70 yen.

In other commodities trading, wholesale gasoline remained at $1.77 a gallon. That also sent the pound higher. Three stocks fell for every one that rose on the New York Stock Exchange, and nine out of the 11 industry sectors in the S&P 500 index were down. The yield on benchmark 10-year U.S. Treasuries, the driver of global borrowing costs, was lingering at 2.846 percent, close to Monday's four-year high of 2.885 percent. The yield on the 10-year note was as low as 2.04 percent as recently as September. European stocks saw across-the-board losses, led by Germany's blue-chip DAX, which lost 2.6 percent, or 330 points.

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