Dow Plunges into Correction Territory: Here’s How Bad Friday’s Market Bloodbath Was
U.S. stocks closed sharply lower on Friday as slowing growth in China and worries about a possible rate hike by the Fed took their toll. The Dow Jones Industrial Average finished the day down 531 points for a 3.12 percent loss. The S&P lost 65 points (-3.16 percent) — its worst day since Aug. 8, 2011 — and the Nasdaq lost 171 (-3.52 percent). For the first time since 2011, the Dow is now in a correction, meaning it has lost 10 percent from its peak. The S&P is nearing correction territory, too, having lost 7.5 percent since its May 21 closing high.
Related: The Stock Market's Fed Fever Is Only Going to Get Worse
The selloff was widespread, with 491 of the S&P 500 stocks ending the day in the red and only 11 managing to advance (the S&P 500 actually includes 502 stocks). For the week, 487 of the S&P 500 stocks fell and only 15 gained. In total, the S&P 500 lost a collective $1.14 trillion in market value on the week. Yes, trillion with a "T."
This snapshot from finviz of the performance of stocks in the S&P 500 gives a sense of Friday's carnage (Click it to enlarge):
Chart of the Day: Boosting Corporate Tax Revenues
The leading candidates for the Democratic presidential nomination have all proposed increasing taxes on corporations, including raising income tax rates to levels ranging from 25% to 35%, up from the current 21% imposed by the Republican tax cuts in 2017. With Bernie Sanders leading the way at $3.9 trillion, here’s how much revenue the higher proposed corporate taxes, along with additional proposed surtaxes and reduced tax breaks, would generate over a decade, according to calculations by the right-leaning Tax Foundation, highlighted Wednesday by Bloomberg News.
Chart of the Day: Discretionary Spending Droops
The federal government’s total non-defense discretionary spending – which covers everything from education and national parks to veterans’ medical care and low-income housing assistance – equals 3.2% of GDP in 2020, near historic lows going back to 1962, according to an analysis this week from the Center on Budget and Policy Priorities.
Chart of the Week: Trump Adds $4.7 Trillion in Debt
The Committee for a Responsible Federal Budget estimated this week that President Trump has now signed legislation that will add a total of $4.7 trillion to the national debt between 2017 and 2029. Tax cuts and spending increases account for similar portions of the projected increase, though if the individual tax cuts in the 2017 Republican overhaul are extended beyond their current expiration date at the end of 2025, they would add another $1 trillion in debt through 2029.
Chart of the Day: The Long Decline in Interest Rates
Are interest rates destined to move higher, increasing the cost of private and public debt? While many experts believe that higher rates are all but inevitable, historian Paul Schmelzing argues that today’s low-interest environment is consistent with a long-term trend stretching back 600 years.
The chart “shows a clear historical downtrend, with rates falling about 1% every 60 years to near zero today,” says Bloomberg’s Aaron Brown. “Rates do tend to revert to a mean, but that mean seems to be declining.”
Chart of the Day: Drug Price Plans Compared
Lawmakers are considering three separate bills that are intended to reduce the cost of prescription drugs. Here’s an overview of the proposals, from a series of charts produced by the Kaiser Family Foundation this week. An interesting detail highlighted in another chart: 88% of voters – including 92% of Democrats and 85% of Republicans – want to give the government the power to negotiate prices with drug companies.
