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Dow Jones has worst day in two years

04 February 2018

The main USA stock index ended the day at 25,520, down 665 points from Thursday's close.

The S&P 500, which hit a record a week ago, fell 59.85 points, or 2.1 percent, to 2,762.13.

The Dow Jones dropped 665.5 points Friday, putting people on high alert. Central Time Friday. That's the biggest loss for the benchmark index since September 2016.

Weak earnings from several giant USA companies including Exxon Mobil and Alphabet, Google's parent company, further dented investors' confidence. Average hourly earnings rose by 2.9 per cent in the year to January, the fastest pace since June 2009, according to the US Bureau of Labor Statistics.

In small-caps, the Russell 2000 Index closed at 1,547.27 for a loss of -32.59 points or -2.06%.

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Production rose 3 percent to 2.7 million barrels of oil equivalent per day.

On Friday shares of Chevron Corp fell 5.6% while Exxon Mobil Corp fell 5.1% after the two companies posted profit that was lower than had been expected for the fourth quarter.

Technology companies also fell.

But historically, pullbacks for stocks are normal, and investors shouldn't be surprised if stocks drop by 5 percent or even 10 percent before they begin rising again.

Germany's DAX slid 1.7 percent, while France's CAC 40 lost 1.6 percent.

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The Nasdaq is up 337.56 points, or 4.9 percent.

A strong jobs report showed wage growth is finally starting to pick up.

Bob Doll, chief equity strategist at Nuveen Asset Management, had expected a slow move to 3 percent by the end of the year, and his target was higher than some.

The higher wage growth and potentially higher inflation "might then lead the Federal Reserve to raise their interest rates more rapidly than the market is comfortable with", he told NPR's John Ydstie.

Google's parent company Alphabet slumped 4.6 percent Friday after reporting results that missed analysts' forecasts. Now, I would argue that bonds are still relatively expensive compared to stocks, as the current price-earnings ratio on the S&P 500 index is near 26. That was the worst point drop since the blue-chip average fell 678.92 points on October 9, 2008, in the midst of the nation's financial crisis.

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Equally important, hourly wages rose 0.3 percent from the prior month to $26.74, putting worker pay up 2.9 percent compared to January of previous year, the largest 12-month gain since June 2009. As bond prices fall, their yields go up, a signal of rising interest rates. "Rates have risen fairly quickly this year and the speed of the advance is worrying".

Dow Jones has worst day in two years