Stocks plunged Monday, Feb. 5, on continued concerns that rising inflation would end a decade of easy money policies and could set up a possible correction.
The Dow Jones Industrial Average tumbled 4.60% to 24,345.75, the S&P 500 fell 4.10% to 2,648.94 and the Nasdaq Composite Index shrank 3.78% to 6,967.53.
Markets continued to fall following concerns raised Friday that inflation may be beginning to increase. On Feb. 2, the U.S. Labor Department released new data showing nonfarm payroll employment increasing by 200,000 jobs in January and that the average hourly earnings for all employees on private nonfarm payrolls increased by 9 cents to $26.74 for the month and by 75 cents over the year. The selloff may be due in part to investors concerned that the bump in wage growth could give the Federal Reserve a stronger case for a hawkish path to raising interest rates. Bonds also responded by steepening the yield curve as the U.S. 10-year Treasury increased to around 2.846%.
However, some believe the selloff may be morphing into a correction of stocks that were oversold in 2017.
"Many sentiment and technical indicators were suggesting that the market was overbought in late January so part of this sell-off can be attributed more to technical factors than fundamental factors," Edward Park, investment director at Brooks Macdonald, wrote in an email.
In banks, Jerome Powell was sworn in as the new Federal Reserve Board chairman Feb. 5, replacing Janet Yellen. He said in a video message that the Federal Reserve will remain vigilant against possible risks to the financial system and that the U.S. central bank will support further economic growth and price stability.
Investors pummeled Wells Fargo & Co. following news of Federal Reserve sanctions against the bank that could reduce profits by as much as $400 million. Shares fell 9.22% to $58.16. Fed officials issued an unprecedented consent order against Wells on Feb. 2, barring the bank from growing beyond its $1.952 trillion in assets. Analysts said the Fed move also amounts to another hit to Wells' already tarnished reputation and could make it difficult for Wells to keep some clients or attract new customers. That would hurt its ability to grow core lending and take advantage of rising interest rates to lift net interest income levels.
The correction in stocks extended beyond Wells, however. JPMorgan Chase & Co. dropped 4.80% to $108.80, Citigroup Inc. decreased
Orrstown Financial Services Inc. increased 0.80% to $25.20. ServisFirst Bancshares Inc. declined 5.72% to $40.19 and The Bancorp Inc. fell 5.66% to $10.00.
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