US stocks struggle to stabilize after entering 'correction'
Stocks struggled to stabilize Friday as investors sent prices climbing, then slumping in unsteady trading a day after the market entered its first correction in two years.
The up-and-down swings followed a drop of 10 percent from the latest record highs set by major U.S. indexes just two weeks ago.
The Dow Jones industrial average slumped nearly 300 points in midday trading after surging more than 349 points earlier in the day. The blue chip average suffered its second 1,000-point drop in a week on Thursday.
Other major indexes also veered lower, piling up losses from the weeklong sell-off that has pummeled stocks. The Standard & Poor's 500 index, the benchmark for many index funds, was on pace to finish its worst week since January 2016.
"When you have an early morning rally in a decline of this nature, all that does is invite selling," said Bruce Bittles, chief investment strategist at Baird. "That's what we saw yesterday, and we know where that ended up."
The S&P 500 fell 20 points, or 0.8 percent, to 2,560 as of 12:13 p.m. Eastern Time. The Dow tumbled 262 points, or 1.1 percent, to 23,597. The Nasdaq composite slid 60 points, or 0.9 percent, to 6,716.
Losses in restaurant chains, cruise lines, department stores and other consumer-focused companies accounted for much of the market's decline. Industrial and energy companies also posted steep losses that outweighed modest gains in technology stocks and other sectors. Oil prices were also headed sharply lower.
Bond prices were little changed. The yield on the 10-year Treasury note held steady at 2.83 percent.
Expedia slumped after its latest earnings fell short of analysts' expectations. The travel website's 2018 outlook also disappointed investors. Its shares sank $21.88, or 17.8 percent, to $101.15.
Other companies rose after reporting quarterly results and outlooks that beat Wall Street's forecasts. Skechers USA climbed $2.03, or 5.3 percent, to $40.21. Chipmaker Nvidia added $6.26, or 2.9 percent, to $223.78.
The slide in U.S. stock indexes followed a broad slide in global markets.
In Europe, Germany's DAX fell 1.2 percent, while France's CAC 40 lost 1.2 percent. Britain's FTSE 100 shed 0.7 percent. Asian markets fell more sharply. Tokyo's Nikkei 225 lost 2.3 percent and Hong Kong's Hang Seng gave up 3.1 percent.
U.S. stocks started to tumble last week after the Labor Department said workers' wages grew at a fast rate in January.
Investors worried rising wages will hurt corporate profits and could signal an increase in inflation that could prompt the Federal Reserve to raise interest rates at a faster pace, putting a brake on the economy.
On Wall Street, many companies that rose the most over the last year have borne the brunt of the selling. Facebook and Boeing have both fallen sharply.
Financial analysts regard corrections as a normal event but say the latest unusually abrupt plunge might have been triggered by a combination of events that rattled investors. Those include worries about a potential rise in U.S. inflation or interest rates and budget disputes in Washington.
In Washington, President Donald Trump signed a $400 billion budget deal Friday that sharply boosts spending and swells the federal deficit, ending a brief federal government shutdown.
The market, currently in its second-longest bull run of all time, had not seen a correction for two years, an unusually long time. Many market watchers have been predicting a pullback, saying stock prices have become too expensive relative to company earnings.
"We may have seen the worst, but it's too early to say for sure. However, our view remains that it's just another correction," said Shane Oliver of AMP Capital in a report.
Corrections of up to 15 percent "are normal," Oliver said.
"In the absence of recession, a deep bear market is unlikely," he said.
American employers are hiring at a healthy pace, with unemployment at a 17-year low of 4.1 percent. The housing industry is solid, and manufacturing is rebounding.
Major economies around the world are growing in tandem for the first time since the Great Recession, and corporate profits are on the rise. That combination usually carries stocks higher. But stock prices have climbed faster than profits in recent years.
Many investors justified that by pointing out that interest rates were low and few alternatives looked like better investments. Fast rising interest rates would make that argument much less persuasive.
In currency markets, the dollar fell to 108.53 yen from Thursday's 108.84 yen. The euro dipped to $1.2226 from $1.2263.
Benchmark U.S. crude lost $1.48, or 2.4 percent, to $59.67 per barrel on the New York Mercantile Exchange. Brent crude, used to price international oils, slid $1.57, or 2.4 percent, to $63.24 in London.