Dow plummets more than 100 points

Losses on Wall Street have been constrained for most of the day, but heading into the final hour the major indices had extended their falls substantially.

A day after setting a record closing price of 15,680.35, the Dow Jones was deep in the red with less than 45 minutes of trading remaining in New York, down 124 points 0.80% at 15,621. The other major US indices fared even worse, with the S&P 500 dropping 1.00% and the NASDAQ 100 down 1.66%, both declines the worst in at least a month.

We’ve seen some instances recently of bad economic news being taken well by the stock market because of its implications for extended stimulus, but today we have the converse, with better-than-expected third-quarter GDP growth and dropping jobless claims sparking fears that tapering may arrive sooner than previously anticipated.

Putting things in perspective, the US stock market has had a bumper run these last few weeks and some kind of time-out was on the cards. The downward movements today have been a little extreme though, particularly if you consider that although the headline GDP rise was high, once you dug into the data things were looking a little soft in certain areas, such as final sales to domestic purchases which actually slackened from the pace seen in Q2.

The magnitude of the stock index falls today does suggest the market remains extremely sensitive to anything that might threaten the easy money gravy train, so we could see volatility tomorrow if the non-farm payroll data surprises (particularly to the upside).

Dow component Disney reports after the market closes tonight.

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