Dow Jones closes down 4.6% in largest one-day point decline

Dow Jones closes down 4.6% in largest one-day point decline

Dow drops below 25,000 for the first time since early January; was sell-off necessary? It was its sixth straight day of declines for the STOXX, while euro zone stocks fell 0.6 per cent.

Stocks sank throughout the day, then went off a cliff in the final hour of trading.

Other recoveries have taken a lot longer.

As Dow continued sliding, President Donald Trump was in Ohio on Monday praising his recently-passed tax overhaul law and telling workers at a factory near Cincinnati that 'America is once again open for business'.

"One thing is that going into the last week or so, investor bullishness was in the top decile of its historical range, which suggests that investors were pretty optimistic, with high expectations and largely complacent", said Jack Ablin, chief investment officer with Cresset Wealth Advisors in Chicago.

When looking at the market over time, it's been climbing steadily over the last year and even over the last five years. The Nasdaq remained marginally higher on the year.

Investors have been spooked in part by reports of a humming U.S. economy.

Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan shed as much as 2 per cent, its largest daily drop since late 2016. Experts have been warning that that wouldn't last forever.

"I think computer-driven trading is a part of it as well".

Locally, the Australian market dropped 2.6% within minutes of opening this morning. In this case, the divergence occurs when price forms a higher high and the indicator forms a lower high. "It's premature for that", he said. The S&P 500 would have to drop 7 percent or more to trigger a halt in trading, and it would have to drop 10 percent or more to be considered a "correction".

The recent days of decline in share indices have come as a reaction of investors to changes in the outlook for the US and global economy. But most aren't. That's something of an illusion, though. Investors will also wait for more quarterly corporate earnings announcements. There is also an important Fibonacci retracement of 61.8% of the month-long rally at the level of 2,749.73.

Are there other reasons to worry?

The DAX of Germany dropped 0.76 percent, the CAC 40 of France fell 1.48 percent and the FTSE 100 of the U.K. declined 1.46 percent. Exxon Mobil and Chevron reported earnings on Friday.

"The level of yields in absolute terms is not the issue (as they remain subdued), rather the velocity of the yield moves is what matters".

But stock prices do matter. It's hard to say, but some major downside risks are growing.

On Tuesday, oil prices were steady.

- Rishi Iyengar contributed to this article. It could eight years from now.

For young investors, a market correction is good news because, if you buy stocks at regular intervals, you will buy stocks when they are lower.

And rapid rate hikes in an overheating economy is "often a precursor to a recession and a bear market", he notes.

That could be painful for markets that have been propped up by central banks' stimulus for many years.

Both historic selloffs occurred on a Monday, too.

In theory, these are all bullish developments. In two-day turn, evaporated practically everything gained since beginning of year. We can use indicators such as Relative Strength Index (RSI), Stochastic Oscillator, Money Flow Index to identify overbought conditions.

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