Volatility of Wall Street is back with a vengeance

By MARLEY JAY

AP Markets Writer

NEW YORK

If you’re an investor who was lulled to sleep by the stock market’s calm, steady gains this summer, you’re wide awake by now.

Stocks have swooned over the last three weeks as investors worried about a sea of troubles, including rising interest rates, the trade tensions between the U.S. and China and slowing economies outside the U.S. All of which could impair profit growth for U.S. companies.

As of Thursday, the S&P 500 index had plunged 7.5 percent in about three weeks, with two separate six-day losing streaks. It hadn’t had a streak of losses that long since right before the November 2016 presidential election. There have been a few big gains recently, including Thursday, but with four trading days left in October the index is on track for its worst month in seven years.

Another big loss could push the index into what Wall Street calls a “correction” – a drop of 10 percent or more from the latest high.

The recent turbulence in financial markets is a contrast to what investors have grown accustomed to in a bull market that has lasted more than 10 years, the longest in history. A hallmark of the past decade has been ultra-low interest rates, which the Federal Reserve used to promote growth in the aftermath of the 2008 financial crisis.

The Fed has been gradually raising interest rates over the past two years, after not having increased them since the recession. Those higher rates have been one catalyst for recent selling.

Market favorites like technology and consumer-focused companies have borne the brunt of the sell-off.

The VIX, an index called Wall Street’s “fear gauge” because it measures how much volatility traders expect, recently reached its highest level since February.

The current skid for stocks is the third big swoon for the markets this year. The first was a dramatic downturn in late January and early February, when the S&P 500 lost 10 percent in just nine days as worries about a sharp slowdown in China’s economic growth rattled markets around the world. That was followed by a less severe stumble in March.

But more recently, stocks had been placid. Between late June and early October, the market didn’t rise or fall as much as 1 percent in a single day. That was similar to the scenario in 2017, when the market drifted higher gradually and finished up 19.4 percent.