Dow Plunges 535 Points

Michael Haddad

2:49 p.m. That escalated quickly.

After holding up for much of the day, the selling has kicked into overdrive. The S&P 500 has tumbled 2.1% to 2727.10, while the Dow Jones Industrial Average has slumped 535.02 points, or 2.1%, to 25,063.72. The Nasdaq Composite has dropped 1.5% to 7313.90.

This drop is getting scary. The S&P 500 just sliced through its 200-day moving average. So did the Dow Jones Industrial Average. The Nasdaq Composite and the Russell 2000 broke their own 200-day moving averages yesterday. If they all close below their 200-day moving averages, which they look set to do, it would be the first time since June 2016 that all four have done, according to Bespoke Investment Group.

Complicating matters is that the economy still looks good, and in the past it’s taken a recession to end a bull market. There’s no sign of one now, and the yield curve, which usually inverts before an economic downturn had been steepening recently. But MRA’s Dean Curnutt reminds us that “market dislocations in 2007 provided an important forewarning about the risks that would ultimately materialize from deteriorating asset prices.” While he acknowledges that 2018 is “vastly different” than 2007, he warns investors to heed its warnings. “For now, the U.S. economy is a ballast to the edifice of risk taking and asset prices,” he explains. “But we absolutely must appreciate the signals from asset prices, especially if, as Trump suggests, the Fed is going loco.”

Does that sound crazy?

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