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The Dow plunged more than 800 points Wednesday, its worst drop in eight months. Rising bond yields have been drawing investors out of the stock market. The best-performing stocks over the past year took some of the biggest losses. (Oct. 10) AP

Investors are bracing for more swings in stock prices Thursday after the U.S. market’s biggest rout since February was followed by sizable losses in Asia and Europe amid fears of slowing growth due to higher interest rates and trade tensions.

In volatile early trading on Wall Street, the Dow Jones industrial was down as much as 151 points but off its lows, after plunging more than 800 points Wednesday. The big stock selloff in the U.S. spread overseas overnight, with Japan’s main stock index falling nearly four percent and shares in Shanghai shedding more than 5 percent. Shares were also down about 1 percent in Europe.

After Wednesday’s rout, Wall Street pros are debating whether the current slide is signaling more severe problems for a bull market that is more than nine years old.

Citing a still low chance of recession in the U.S., the current swoon is more likely just a “correction” — or short-term pause — in an ongoing bull market, says Hugh Johnson, chief investment officer at Hugh Johnson Advisors, a money-management firm in Albany, NY. 

Wall Street pros will be watching a few key things today:

Will bargain hunters step in?

Investors will be looking for signs of stabilization in the form of investors swooping in to buy stocks at lower prices after yesterday’s major drop. Following the 20 daily declines of more than 3 percent for the S&P 500 dating back to 1950, the closely watched index has been up 1.3 percent, on average, five days later, and up 1.7 percent a month later, according to data from Strategas Research Partners.

Key level on S&P 500

The long upward trend of the the S&P 500 has not yet been broken. But there’s a chance of that happening. The large-company stock index closed at 2785.68 Wednesday, slightly above its long-term trend line, or average price over the past 200 trading days. If the index can remain above its so-called 200-day moving average of 2766, that would be a positive sign and create a line of support for the market.

Behavior of technology stocks 

Tech stocks, the longtime market leaders, suffered the biggest declines yesterday — and Wall Street will be watching to see if they can rebound or at least show signs of stabilization. The Nasdaq composite, which is packed with tech stocks, tumbled 4.1 percent Wednesday. And well-known tech stocks, such as Amazon, which fell 6.2 percent, Netflix (off 8.4 percent), and Apple (down 4.6 percent) got hit hard. 

In early trading, Amazon was off 3.6 percent, Apple was 2.3 percent lower and Netflix was down 0.7 percent.

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Investors got some good news on the economic data front early Thursday. An inflation reading on U.S. consumer prices in September came in lower than expected at 0.1 percent, which suggested that inflationary pressures are not ramping up.

 

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