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Why Stocks Are Falling Again Friday

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U.S. stocks continued their plunge Thursday, moving back into correction territory, as the fear related to the Coronavirus has flared up again. 

The S&P 500 fell as much as 3% Friday, sending in 13% below its all-tim high hit in February. Correction is a 10% or more fall from highs. 

Stocks corrected a week ago, bounced briefly, and have slipped again as investors question the viability of global bank interest rate cuts. There is no end to the coronavirus in sight and some economies are facing the possibility of a recession, which the U.S. isn’t immune to. The other two major U.S. indexes also fell meaningfully. 

Many strategists had pointed to historical market movements — in stocks and bonds — to show that the fear level had topped and that risk appetite would soon return. That hasn’t happened yet. 

“At this point no one can really explain why the markets behave the way they do, and what may be next,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “The only thing we can see is volatility is bad, whether it is positive or negative.” 

Even with a strong jobs report — the U.S. economy added 273,000 jobs in February against econismts estimates of 174,000 — investors are worried. The economic risks from the virus, which continues to rage, are ahead, not behind. 

Investors have rushed into safe bonds. The 10-year treasury yield hit an all-time low of 0.7%. The 30 year treasury bond yields 1.26%, roughly in line with the newly lowered Federal Funds rate, which is short-term debt. Investors are paying as much to own long-term debt as they are to own short-term debt, an ultimate indicator of fear. 

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