February 5, 2018 — Stocks went into free fall on Monday, and the Dow plunged almost 1,600 points — easily the biggest point decline in history during a trading day.
Buyers charged back in and limited the damage, but at the closing bell the Dow was still down 1,175 points, by far its worst closing point decline on record.
The drop amounted to 4.6% — the biggest decline since August 2011, during the European debt crisis. But it was nowhere close to the destruction on Black Monday in 1987 or the financial crisis of 2008. Still, for investors lulled to sleep by the steady upward climb since Election Day, it was alarming.
And the rout in U.S. markets continued to ripple around the globe. Japan’s Nikkei index plunged 4% in Tuesday morning trading while the S&P/ASX 200 in Australia dropped 3%.
The White House said in a statement that President Trump was focused on “our long-term economic fundamentals, which remain exceptionally strong.”
The statement cited strengthening economic growth, low unemployment and increasing wages for workers.
The trouble in the market began early last week, when investors focused on a number of lingering concerns.
If the economy gets much stronger, it could touch off inflation, which has been mysteriously missing for the nine years of the post-crisis recovery. That could force the Federal Reserve to raise interest rates faster than planned.
“People are dealing with the shock of seeing real inflation for the first time in a while,” said Bruce McCain, chief investment strategist at Key Private Bank.
The sell-off wiped out the Dow and S&P 500 gains for the year, and left the Nasdaq barely in positive territory for 2018.