On Tuesday, the stocks of the United States traded critically low falling for a second day due to the fact of intensification of the first major sell off in the new year. The average of the Dow Jones industrial dropped by 286 points and briefly fell by 352 points, with UnitedHealth as the biggest decliner as compared to others. The 30-stock index was also on track for its largest points drop in two days since the month of September in the year 2016. The S & P 500 pulled back about 0.9 percent, with the health care sector at its worst performance level. The Nasdaq composite fell about 0.8 percent. Art Hogan who is the chief market strategist at B. Riley FBR said that they had a one-sided move higher in the stocks for starting things off and the people are realizing this is not sustainable. He also said that there are also some cracks seen in the global story with interest rates rising.
On Monday, the average of the Dow Jones industrial fell by 177 points on the back of a rise in the 10-year treasury yield which has raised a lot of concerns that the higher interest rates could douse the bull market. On Monday, the Dow, along with the S & P 500 stated its worst ever decline of the year. On Tuesday, the treasury yields that are long dated climbed further up with the US 10-year Treasury yield trading at levels which have not been seen since the year 2014, among the situation of fears of higher inflation. The benchmark yield started the year trading around 2.4 percent. A higher rate of inflation could also lead to the tightening of the monetary policy by the central banks at a much faster rate than what is expected by the market.
In the previous week, Barry Bannister who is a strategist at Stifel predicted the Federal Reserve will cause a correction in this quarter as it leads other central banks into a much tighter monetary policy. On Tuesday, the Fed had already kicked off its latest two-day monetary policy meeting. According to the FedWatch tool of the CME Group, the market expectations for an increase in the rate are only 5.2 percent. But Robert Pavlik who is the chief investment strategist at SlateStone Wealth stated that he is not of the viewpoint that this is the beginning of a major pullback.