This is why the Dow is plunging

Stocks' slide tops worst week in 2 years

The selling was fuelled also by profit-taking after a blistering January that saw several indexes strike record or multi-year highs, while energy firms were hit by a drop in oil prices.

Even good economic news can prompt some troubling concerns. Similarly, between May 2003 and June 2006, the 177 bps surge in the UST 10-year yield failed to deter U.S. equities from notching up gains of 32 per cent.

U, a bellwether of bond proxies, and its defensive peer the real-estate sector.SPLRCR, have fallen almost 11 percent and 8 percent, respectively, since early September - against a near 8 percent growth in the broader market .SPX. (They pulled back a bit on Monday.) The recent tax bill has forced the Treasury to borrow more money, which will put more bonds into play.

"It looks to me like a typical type of scenario when you see a single stock flash crash where you'll see bids just disappear, stop orders get kicked", said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. "It will be, but not today".

The S&P 500 dividend yield has been at around 2 percent for the past nine years, drawing investors looking for dependable returns. The technology-laden Nasdaq was down six of its last eight sessions as markets opened Monday.

The expectations that the Fed will stay the course is helping widen the spread on 10-year Treasuries over similar-maturity bunds.

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Apparently those numbers just aren't enough to justify the price of stock and the shelf space needed to keep CDs in stores. Target could also make a similar move as consumers gravitate toward music streaming services like Spotify and Apple Music .

"There are spots in the utility market; (stocks that are) trading at 18 to 21 (price-to-earnings), where they ought to be trading at 13 to 14".

A strong dollar policy has allowed the Fed to keep interest rates low for a prolonged period, argues Rebecca Patterson of Bessemer Trust. "It's not setting some new kind of record other than its rapid ascent".

Friday's USA payrolls report showed wages growing at their fastest pace in more than eight years, fuelling concerns that both inflation and interest rates would rise faster than expected. In one sign of a shift underway, a measure of expected market turbulence, the CBOE Volatility Index, jumped by more than 25 percent Friday. Why do rising bonds hurt stocks?

This is a critical question as the United States share market invariably sets the direction for global shares including the Australian share market and historical experience tells us that slumps in shares tend to be shallower and/or shorter when there is no U.S. recession and deeper and longer when there is (eg, the tech wreck and the Global Financial Crisis). Apple, Cisco, Intel and Microsoft were all on the upside as the rest of the 30-stock blue chip index went negative.

Janet Yellen, who stepped down as Fed chair Saturday, dedicated her four-year term to preventing turmoil in the financial market while tapering monetary easing. The relative serenity over the past year where markets seemed on a relentless, upward arc is an anomaly.

Rory McPherson, head of investment strategy at Psgima IM, said investors should expect more volatile markets heading into 2018, as this is the first year where the marginal buyer of bonds is not a central bank.

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It wasn't like this in past episodes of equity-market selloffs. That kind of spike in borrowing helped push government bond yields to levels last seen four years ago. Average hourly earnings increased by 2.9% in the year to January, up from an upwardly revised 2.7% growth in the previous month and the fastest rate of increase since June 2009.

After a decade of near zero real income growth across the developed world, workers may well be seeing wages rising again at last and global markets do not like it. Why?

India, too, is witnessing a rise in yields on 10-year bonds, and the Dalal Street is feeling the heat.

Note that this chart is the annualized percentage change in gold to correlate with the percentage rate of inflation. That was more than twice as much as Monday's fall.

In a unusual way, investors are nervous that the global economy is doing too well.

Wells Fargo sank $5.91, or 9.2 percent, to $58.16.

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Second, falls associated with recession also tend to be deeper with an average decline of 36% compared to an average of 17% for all 10% plus falls.

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