US markets tumbles; Dow suffers biggest drop in eight months

31 Jan 2018 Evaluate

The US markets closed lower on Tuesday, for a second straight session, with the Dow suffering its biggest one-day drop in eight months, as heavy losses in health-care and energy shares weighed on the main indexes. Meanwhile, climbing US bond yields, which imply a rise in borrowing costs, were also weighing on stocks in a repeat of Monday’s action. Investors are looking ahead to the State of the Union address by President Donald Trump. The Atlanta Federal Reserve’s GDPNow forecast model showed that the US economy is on track to grow at a 4.2 percent annualized rate in the first quarter, accelerating from the final quarter of 2017 that was held back by a surge in imports.

On the economy front, consumer confidence rebounded in the first month of the New Year, climbing to 125.4 in January from a revised 123.1 at the end of 2017. Americans were a little less sure about the economy in early 2018, but they expect growth to improve in the months ahead. One area of uncertainty was the effect of the recent tax cuts on their own incomes. Lower tax rates aren’t expected to show up in paychecks until early February. Consumers are generally quite optimistic about the next six months, though. An index of future expectations rose to 105.5 from 100.8 and returned close to a 14-year high. The present situation index - how Americans feel about the economy right now - slipped to 155.3 from 156.5.

Meanwhile, the S&P/Case-Shiller 20-city index rose a seasonally adjusted 0.7% in the three-month period ending in November compared to the same period ending in October, and was up 6.4% compared to a year before. The national index rose a seasonally adjusted 0.7% for the month, and 6.2% for the year. Both annual increases were higher than in the prior month’s release. The 20-city index rose 6.3% in the three-month period ending in October. Surging prices are all about limited supply of homes to buy. Home prices continue to surge well ahead of inflation and wage gains. Prices were hottest in Seattle, where they rose 12.7% compared to a year ago, and in Las Vegas, where they rose 10.6% for the year. Even San Francisco’s short blip seems to be over: it was in third place, with a 9.1% annual increase. Such lofty gains don’t seem sustainable, even if they’re driven by true demand and limited supply, rather than a bubble mentality.

The Dow Jones Industrial Average dropped 362.59 points or 1.37 percent to 26,076.89, the Nasdaq lost 64.023 points or 0.86 percent to 7,402.48, and the S&P 500 edged lower by 31.1 points or 1.09 percent to 2,822.43.

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