Wild Swings in Stock Market Reflect Jitters About Economy's Strength
(INDIANAPOLIS) - The stock market roller coaster ride could be a warning sign for the economy.
The Dow Jones industrials dropped 800 points on December 4, the day President Trump declared himself a "tariff man" on Twitter. This week, the index plunged 650 points on Christmas Eve, closed for Christmas, then gained 1,300 points in two days, including a record 1,000-point gain on Wednesday. On Thursday, the average was down 600 points, then stormed back in the final hour of trading to end the day up more than 200.
There have been just five trading days this month when the market didn't move at least 200 points.IU Kelley School of Business economist Kyle Anderson says it's the most volatile market in seven years.
But while Anderson says tariffs are one reason, he says a larger factor is the end-of-year release of company earnings forecasts. He says the whipsawing between big upswings and steep drops reflects the mixed bag of results from different companies.
The NASDAQ stock index has formally entered bear market territory, defined as a 20% drop from its peak. The Dow and S&P averages approached that threshold on Christmas Eve but haven't crossed it. Anderson says the bear market designation is more a label than a meaningful description, and says it's still unclear what direction the market will go in the weeks ahead. He says ending the five-day government shutdown might help steady the market by restoring some certainty.
But Anderson warns the stock market can foretell larger economic trends in the months ahead, and says the sliding averages indicate investors are fearful of a weakening economy.
Three of the Dow's 20 biggest single-day drops, and the biggest one-day gain, have taken place this month, although none of those swings has been close to the largest swings in percentage terms.
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