Wall Street swings down 500, up 500 Friday ... so what's next?

Susan Tompor
Detroit Free Press
Traders work on the floor of the New York Stock Exchange at the Opening Bell in New York on February 9, 2018.

Now what?

Even those who pride themselves in never panicking must give pause after just watching Dow Jones industrial average tumble and threaten at one point Friday to turn in the worst week since the financial crisis in late 2008.

Make no mistake, this is not 2008. We're not looking at a collapse of credit markets, massive layoffs and seemingly never-ending home foreclosures. We're looking at a 4.1% U.S. jobless rate. 

And Friday ended with a rebound to prove to be only the worst week since January 2016. 

Still, investors got whiplash through the day. The Dow was down more than 500 points at one point, up around 500 later in the afternoon. The roller-coaster ride was so intense that many experts expressed shock. 

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The Dow closed with a gain of 330.44 points, or 1.38%, to close at 24,190.90 points. 

Ford Motor closed at $10.53 a share, up 10 cents, or 0.96%. General Motors closed at $41.46 a share, up 71 cents, or 1.74%. Fiat Chrysler Automobiles closed at $21.52 a share, up 4 cents, or 0.19%. 

While Friday turned out to close on the upside, no one is breathing easy. 

The Dow dropped nearly 666 points on Friday, Feb. 2.

The Dow fell another 1,033 points on Monday.

The stock market had a good day Tuesday and an OK day Wednesday.

But then the Dow fell 1,033 points Thursday.

In the past week, we have seen the two largest point drops in the Dow ever, but they aren't even in the group of the worst percentage losses of the Dow's history, said Sam G. Huszczo, a chartered financial analyst in Southfield.

Granted, the point declines are going to look larger when the Dow is trading in the 25,000 range, instead of the 10,000 range. A 4% drop amounts to losing 1,000 points when you're in the 25,000 range. It's 400 at 10,000.

But the stock market has moved into a correction mode. The Dow is down about 9% — or about 2,425 points — since closing at a record 26,616.71 on Jan. 26. 

We're looking at a time of far more volatility where algorithms and options traders will create more jitters. 

It's not earnings or the economy — it's some technical trading.

And it's worry.

Back in 2017, we were living with FOMO — that anxiety that builds when you're not investing much and you have a deep Fear of Missing Out. After all, you're hearing about friends and family making big gains in their 401(k)s. 

In 2018, we're living with the FOMC — the fear that the Federal Open Market Committee could drive up interest rates much higher than expected in 2018.

Analysts point to the low jobless rate and the pressure that employers are feeling to boost wages. As wages go up, Fed policy-makers could be pressured to drive up interest rates significantly. And there's more fear that Washington's budget deal and the stimulus of the tax cuts may drive the Fed to boost rates to combat inflation. Most people sitting around the breakfast table aren't talking about the risk of higher rates, but they are asking what's going on with their 401(k)s. 

David Sowerby, managing director and portfolio manager for Ancora, said he would still expect the stock market to finish positive in 2018 based on the overall strength of the U.S. economy and corporate profits. 

"With the average stock down 16% from its 52-week high, it presents greater buying opportunities," he said. 

Yet Sowerby warned that investors must brace for more swings in stock prices in the next few weeks. 

Brutal smackdowns for stocks rarely end quickly. Yet in this wacky market, Friday's activity on Wall Street turned out to do just that. 

Contact Susan Tompor: stompor@freepress.com or 313-222-8876. Follow Susan on Twitter @Tompor.