Dow Jones drops 470 points as market faces rate hike fallout

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"China is cooling and the euro zone is slowing down, and some of the economic indicators from the US have been a bit soft recently, but yet the Fed hiked rates and suggested that two more interest rate hikes were lined up for 2019", said Michael Hewson, chief markets analyst at CMC Markets in London.

Several other key indexes in recent days have confirmed they were in bear markets, among which are the Russell 2000 small-cap index .RUT and the Dow Jones transportation average .DJT .

The broad-based S&P dropped 1.5 per cent to 2,506.87, while the tech-rich Nasdaq Composite Index sank 2.2 per cent to 6,635.48.

Stocks went into another slide Thursday in what is shaping up as the worst December on Wall Street since the depths of the Great Depression, with prices dragged down by rising fears of a recession somewhere on the horizon.

The technology stocks that have led the market in recent years are now dragging it down.

The Russell 2000 is down nearly 24 percent from the peak it reached in late August and it's down 13.6 percent for the year to date.

Then the political gridlock in Washington put the market in a downward spiral, as President Donald Trump held fast on his demands for more border security funding and Democrats resisted, and the government moved closer to a shutdown. The U.S. economy has been growing since 2009, and most experts think it will keep expanding for now. In general, shutdowns don't affect the US economy or the market much unless they stretch out for several weeks, which would delay paychecks for federal employees.

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"This is the classic shoot-first-and-ask-questions-later market", said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute.

It is the biggest weekly percentage drop since August 2011 while the Nasdaq's 8.36% decline is the sharpest since November 2008. The S&P 500, the benchmark for many index funds, has fallen 17.5 percent from its high in September. The yield on the 10-year Treasury finished today nearly a half percent lower than its recent October peak. The Nasdaq fell 195 points, or 3 percent, to 6,332.

The Street reported fears of a government shutdown was also being felt on the markets.

Bond prices rose, sending yields lower.

In France, the CAC 40 lost 1.8 percent and Germany's DAX fell 1.4 percent. Indexes in Italy, Portugal and Spain took bigger losses.

Microsoft and Amazon each fell 3.4 percent. Copper lost 0.8 percent to $2.67 a pound. Those worries are reinforced by a 30 per cent-plus decline in world oil prices since October. Silver rose 0.3 percent to $14.87 an ounce and copper, which is considered an indicator of economic growth, fell 0.7 percent to $2.70 a pound.