Dow Jones plunges 1,000 points as inflation fears spook investors
US stocks have plunged again with the Dow Jones industrial average experiencing a four-digit loss second time in a week due to fears of higher interest rates.
On Thursday, the Dow fell 1,032.89 points, or 4.15 percent, to 23,860.46. The Nasdaq Composite lost 274 points on the day, or 3.9 percent, to 6,777.16, while the S&P 500 closed with a 100-point loss, or 3.75 percent, to 2,581.08.
It was the second time in history the Dow has lost more than 1,000 points in a single day.
On Monday, the Dow suffered its biggest one-day point drop in history, plunging about 1,600 points during trading hours before recovering to close down at 1,175.
All the 30 companies that make up the Dow index were in the red on Monday, with Verizon, Microsoft, and Exxon Mobil each falling more than three percent.
Overall, the Dow has lost more than 2,000 points since January 26.
US President Donald Trump on Wednesday said traders who are selling stocks are making a "big mistake" and they will regret their actions.
"In the 'old days,' when good news was reported, the Stock Market would go up. Today, when good news is reported, the Stock Market goes down," Trump tweeted. "Big mistake, and we have so much good (great) news about the economy!"
Why are stocks plunging?
Investors fear that the Federal Reserve will soon raise interest rates, which would boost the cost of borrowing money.
“Things haven’t quietened down. Things are all over the place. The market is trying to find a bottom to this madness,” said Jason Ware, chief investment officer at Albion Financial Group.
“Now we are having acute attention on what happens in the bond markets, so when yields move up there is an unsettling feeling in the equity market,” Ware added.
CNN Money’s David Goldman said earlier this week, "Stocks have been rising steadily since the election in part because the US economy is strong. Given that US unemployment is historically low, and there are more open jobs than people to fill them, companies are starting to pay workers more to retain existing employees and attract new hires. Businesses will eventually have to raise prices on the stuff they sell to afford their growing payrolls causing inflation. The Federal Reserve combats inflation by raising its interest rates."
A second reason is the increase of government-backed bond yields: stocks are a higher-risk investment than bonds, which are backed by the United States Treasury. If bond yields start to rise, investors will want to take some of their money out of stocks and put it into safer bonds, he added.
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