Dow drops more than 1100 points

Trader Patrick Mc Keon works on the floor of the New York Stock Exchange Wednesday Feb. 7 2018

The Dow dropped nearly 1,800 points (7 percent) over two days and opened with a 350-point dip today before rebounding. The US stock market fell, not because of the super duper blue blood moon but because of the fear he might actually do what he says.

The stock market can, when looked at in concert with these other indicators, provide some useful insight.

"We're pouring a tremendous amount of fuel on the fire", said Rick Rieder, who oversees roughly $1.7 trillion in assets as global chief investment officer for fixed income at asset manager BlackRock.

In my view, we are seeing a combination of two factors. On the downside, stock prices probably won't be as insanely good. That should be good news. Investors are concerned that the recent period of low inflation and low interest rates may be coming to an end.

Although expansion progressed progressively over past nine years, inflation remained mysteriously low, as Powell acknowledged.

He said: "It would be extremely unusual to see a sustained or deep equity bear market against such a positive economic background".

The catalyst for Friday's fall appeared to be a government report that showed the strong USA economy might finally be translating into rising wages for US workers.

For much of the past year, the stock market glided higher, lifted by solid economic growth and corporate profits, low interest rates and few signs of inflation. Over the past year, the greenback has slumped by more than 13 percent, even before Treasury Secretary Steven Mnuchin began talking the dollar down last week.

Jerome Powell has sworn on Monday as sixteenth president of Federal reserve of United States (EDF), ensuring that his team is prepared to respond to evolution of risks.

Daryl Liew, head of portfolio management at REYL Singapore, said the fall in markets had offered several attractive opportunities in North Asia such as China H-shares and Korea due to their valuations.

The stock market continued its massive slide Tuesday morning as the Dow Jones opened down 522.94 points, or 2.15 percent, briefly dipping into a correction phase - a 10 percent decline from the index's 52-week high - before rebounding. Brookings announced last week that Yellen would join the Institution on Monday as a Distinguished Fellow in Residence with the Economic Studies program. President Donald Trump chose not to reappoint Yellen and instead turned to Powell, a former Fed governor expected mostly to continue to current Fed path.

Since the global financial crisis a decade ago, a few simple guidelines have helped investors make sense of the markets.

The Fed in December raised the benchmark lending rate for the third time last year, and indicated that another three hikes were likely this year. Prices and inflation have certainly been "stabilized", but that is somewhat of a failure since the Fed has been saying for years that it was trying to increase inflation. And if that is true, then rate rises should not impair corporate profits, although they could act as a drag on stock prices to some degree. "But I do want to say high", she said. Investors are anticipating that the European Central Bank could pull back, depending on the economic conditions.

The era of cheap money is ending, and for markets who got addicted to it, it's undoubtedly bad news.

"However, as Powell is very new to the job, we would not be too surprised if it took a little time for that statement to come".

Economists often advise governments to run large deficits during recessions to stimulate growth.

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