The Dow Jones industrial average closed at an all-time high on Wednesday as investors bet that the economy will return to normal, but it took a significant step back on Thursday.
The index briefly dropped more than 1 per cent in early trading.
It is now down just over 0.2 per cent since the beginning of the year.
The Dow is down more than 20 per cent this year, and it has fallen even more since the start of 2017.
“The economy is not back yet,” said Jason Schreiber, chief market strategist at Schreib Capital Advisors in London.
“I’m not saying it’s going to be good, but we are starting to see the positive signs of it being back to normal.”
The Dow’s collapse was the biggest since the 2008 crash, and is the second biggest in a single day in the index’s history.
The S&P 500 has also fallen more than a percentage point.
In an email to investors, Dow futures manager James Waggoner said: “We expect the Dow to drop another 1-2 per in the coming hours, as we expect the labor market to tighten as the end of the week approaches.”
The S+P 500 also fell slightly.
The Nasdaq composite, which includes the Dow, the S&P 500 and the Russell 2000, also dropped.
It was down 0.3 per cent for the day, but up 1.6 per cent from a day earlier.
The broader Dow Jones index was up 3 per cent.
“If you have been following the stock market for a while, it is no surprise that the market has moved to the right,” said Waggoni.
The economy, however, was not back to the same level of strength it was at before the election. “
That is why the Dow is at record highs and is now trading at record lows.”
The economy, however, was not back to the same level of strength it was at before the election.
Economists are worried that the slowdown in China and other emerging economies is likely to persist, and that the U.S. economy will be unable to absorb the full impact of the election shock.
The economy slowed to a crawl after Donald Trump’s victory in November, and now it has only grown at about 3 per.cent a year.
Unemployment is currently 5.6.
Inflation is also at a record high.
“We are still on the sidelines,” Waggonisaid.
“People are trying to make decisions about how they are going to spend their money, and a lot of people are not feeling the benefit of the recovery.”
Dow closes at 2,831.08 The Dow closed at 2:831 on Thursday, as the S+Y index closed at a new record high of 2,891.22.
The dollar is up 0.4 per cent against a basket of currencies, the dollar index rose 0.6 percent, and the euro gained 0.9 percent.
The greenback also strengthened, but was still down 0,1 per cent on Wednesday from Thursday’s close.
The US Federal Reserve has set a key interest rate target of 1 per in November and is expected to hike it by 0.25 per cent, with an eye on reaching 2 per cent by the end the year to spur economic growth.
The Federal Reserve will also lift its key rate target for June, but there is uncertainty over the direction and timing of that move.
The market is not expected to see an immediate hike by the Fed.
The Fed’s target for the first quarter of 2019 is 1.25 percentage points higher than what is expected in January 2019, and its target for that period is likely set to be lower than its January target.