Dow sinks 665 points in biggest drop since Brexit vote
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Major U.S. stocks plummeted Friday, with the Dow sinking 665 points, amid signs that strong wage growth may lead to increased interest rates and inflation.
Why it matters: Today was the worst day for stocks since June 2016, after the Brexit vote in Britain. The plunge could signal that the equity markets had overheated after a remarkable 14 months sparked by booming consumer confidence and the promise of a major tax cut after Donald Trump was elected.
The numbers, per CNBC:
- The Dow dropped 665 points (more than 2%), bringing the 30-stock index below 26,000.
- The S&P 500 fell 1.8%, with energy stocks performing the worst.
- The Nasdaq sunk 1.5%.
Driving the drop: Earlier today the Labor Department reported that the U.S. added 200,000 new jobs to the economy, while the unemployment rate stayed at 4.1%. The report also showed that hourly wages grew 2.9% in the last 12 months, the fastest pace in a decade — spurring concerns over inflation.
Between the lines: All this sets the stage for the Federal Reserve to increase interest rates.
"The key for the market today is rising interest rates. The old adage is: 'Bull markets don't die of old age, they are killed by higher interest rates.' That looms large."— Mike Baele, managing director at U.S. Bank Wealth Management, to CNBC.
