Dow bounces more than 300 points Friday, but still posts worst week in 2 years

Dow bounces more than 300 points Friday, but still posts worst week in 2 years

Thomas Franck | Alexandra Gibbs

Dow trades in 800-point range as volatility continues  

The Dow Jones industrial average rebounded more than 300 points Friday, with buying in the final hour lifting the major indexes.

The index swung more than 850 points in volatile trading Friday. The S&P 500 and the Nasdaq composite joined the Dow in its trip higher, both rising more than 1.4 percent.

At its lows Friday, the Dow had fallen more than 500 points or 2.1 percent. The average experienced two drops of more than 1,000 points and two gains of more than 400 points.

The Dow ended the day up 330.44 points, or 1.38 percent, closing at 24,190.90. The S&P 500 rallied 1.49 percent through the close to finish at 2,619.55, while the Nasdaq composite added 1.44 percent to close at 6,874.49.

The S&P 500, meanwhile, broke below its 200-day moving average, a key technical level according to traders.

“We bounced off the 200 moving day average on the S&P 500 and saw some algorithmic programmed buying,” said FBN Securities’ Jeremy Klein, who called for a market downturn in January. “For the most part, the rates going higher triggered the decline … once we get through this bout of volatility, the rates will matter again much more.”

The Dow dropped 1,032 points Thursday, its second drop of that magnitude this week. The index posted its worst point drop in history on Monday, closing 1,175 points lower. Monday’s decline of 4.62 percent was also its worst daily percentage drop since Aug. 10, 2011, when it also fell 4.62 percent.

The recent turmoil in equities began last Friday, when the Dow fell 666 points after a better-than-expected jobs report ignited inflation fears. That fall was exacerbated Monday after the yield on the benchmark 10-year Treasury note hit a 4-year high, sending the Dow tumbling another 1,175 points as investors grew more nervous about an overheating economy.

Trouble with securities called exchange-traded notes that decline in value when volatility increases likely helped create more turmoil in the markets this week. The Cboe Volatility index (VIX) — the market’s best fear gauge — was higher around the 30 level after jumping as high as 50 earlier in the week. At the end of January, the VIX was below 14.

Yields then backed off their multi-year highs, giving the Dow a 560-point bounce on Tuesday and relative stability on Wednesday. But between another round of strong economic news, hawkish comments from the Bank of England and an expensive government funding bill, yields rallied again, sparking Thursday’s sell-off.

“What’s happened here is an understanding that inflation is returning and that the central bank quantitative easing that we’ve grown accustomed to is coming to an end,” said Jim Bianco, head of the Chicago-based advisory firm Bianco Research. “Since the financial crisis, this is the first 10 percent correction in stocks that has not been accompanied by a significant fall in rates.”

The 10-year Treasury ticked up to 2.84 percent Friday. The note yield flirted with 2.885 percent Thursday, a 4-year high that sparked major equity sell-offs earlier in the week.

E-commerce giant Amazon wasn’t helping things either. The company is gearing up to launch a delivery service for businesses, pitting Jeff Bezos’ logistical prowess against carriers like FedEx and UPS, the Wall Street Journal reported early in the day.

Shares of UPS and FedEx were both down more than 2 percent Friday; Amazon also fell Friday, down 2 percent.

Other stocks that have struggled this week include 3M, American Express and Exxon Mobil, down more than 10 percent as oil prices continue to slide.

In commodities, oil prices fell for a sixth day on Friday, posting their worst weekly decline in two years. U.S. West Texas Intermediate (WTI) crude settled at $59.20, down 3.2 percent.

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Overseas market fared little better. In Japan, the Nikkei 225 index fell 2.3 percent, now down 11.4 percent from its 52-week high. In Germany, the Dax index slipped 1.25 percent, down nearly 11 percent from its own 52-week high.

While the week has certainly spooked many traders, several Wall Street strategists believe the recent volatility shouldn’t affect the rest of 2018.

“When the nervousness hit, a lot of people who were thinking of quitting hit the exits,” said Bruce McCain, chief investment strategist at Key Private Bank. “A lot of people want to let it settle out a bit and really make sure the worst has past … [but] for our standpoint on where we’ll be over the next year: We see no signs of recession.”

Progress on a government spending bill also made headlines on the week’s final day of trading. President Donald Trump signed a massive spending deal into law after both chambers of Congress approved the bill early Friday morning.

—CNBC’s Jacob Pramuk contributed to this report.

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