Why Stocks Plunged Last Week

Interest rates rose on inflation fears, cratering stocks for the week. On Friday, the Standard & Poor's 500 stock index plunged by 2.1%, capping a 3.9% drop for the week, the biggest weekly loss in two years.

It was a week of big financial news: Janet Yellen exited as chair of the U.S. Federal Reserve Board of Governors, ceding control of the nation's central bank to Jerome Powell; the political crisis in Washington, D.C. deepened, adding to investor jitters; and employment costs soared while new figures on jobs and wages stoked inflation fears.

The yield on a 10-year U.S. Treasury bond rose from 2.4% to 2.8% in just the past month, according to data from the Fed. Meanwhile, in the same period, the yield on a 10-year Treasury Inflation Protected Security moved up only slightly. The difference between the nominal 10-year Treasury bond yield and the TIPS yield shows the market's expectations of rising inflation over the next 10 years.

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This article was written by a veteran financial journalist based on data compiled and analyzed by independent economist, Fritz Meyer. While these are sources we believe to be reliable, the information is not intended to be used as financial advice without consulting a professional about your personal situation.

Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. Past performance is not an indicator of your future results.

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