USA stocks struggle to stabilize after entering 'correction'

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Feb 9 (Reuters) - Wall Street's three main indexes rose more than 1 percent on Friday, bouncing back from a steep selloff this week that pushed the Dow Jones Industrial Average and the S&P 500 into correction territory.

The Dow Jones industrial average was briefly up more than 300 points in early trading, a day after it suffered its second 1,000-point drop in a week.

China was the worst performer in Asia on Friday - on track for its worst day in almost two years - as losses deepened from declines seen earlier this week.

Asian markets also followed USA stocks down after the Dow, coming off a record high, entered a correction - or a 10 percent decline from its latest peak - for the first time in two years. "Prior to the price action over the last ten days, the major United States indices had rallied nearly without interruption since the Brexit vote in June 2016", said David Morrison, senior market strategist at GKFX. Eastern Time. The Dow gained 282 points, or 1.2 percent, to 24,142.

The S&P 500 shed 58 points, or 2.2 percent, to 2,620 as of 1 p.m.

Bond prices fell. The yield on the 10-year Treasury note rose to 2.85 percent. That's good for the economy, but investors anxious it will hurt corporate profits and that rising wages are a sign of faster inflation.

Walmart was the biggest decliner in the 30-company Dow, sliding $2.43, or 2.4 percent, to $97.59.

Expedia shares sank 14.5 percent after the online travel services company said costs would outpace revenue growth this year as it battles rivals for market share.

More sharp losses in the Asian stock markets today after markets fell dramatically on Tuesday.

At the same time, higher interest rates can make investment alternatives to stocks, such as bonds, more attractive. The last bear market was during the 2008 financial crisis.

European stock indexes have opened lower after another tumble on Wall Street the day before caused jitters through global markets.

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Elsewhere in Asia on Friday, Hong Kong's Hang Seng pulled back 3.7%, while South Korea's Kospi index traded down 1.6% and Australia's S&P/ASX 200 eased 0.8%.

Financial analysts regard corrections as a normal event but say the latest unusually abrupt plunge might have been triggered by a combination of events that rattled investors.

Bloomberg's Elena Popina told Larry Williams the talk around Wall Street is that there will be more pain in the coming days. Britain's FTSE 100 fell 1.5 percent.

The Australian and New Zealand dollars have fallen against their USA equivalent, central and eastern European currencies like the Polish zloty and the Hungarian forint have fallen against the euro, while the pound is lower against both the U.S. dollar and the euro even after the rally on Thursday sparked by the Bank of England's warning that interest rates are likely to rise more rapidly than expected. Those include worries about a potential rise in US inflation or interest rates and whether budget disputes in Washington might lead to another government shutdown.

"History does show that, even though we haven't seen this quick of a movement from a peak to correction mode, what we do know is the swifter the way down, the sooner the market will bottom and start moving up", Bell said. Many market watchers have been predicting a pullback, saying stock prices have become too expensive relative to company earnings.

The central bank may have to more aggressively raise short-term rates to offset the economic stimulus from higher government spending and lower taxes, which also unnerves investors. Natural gas fell 11 cents, or 4.2 percent, to $2.58 per 1,000 cubic feet.

The economy is already running hot, with the nation's unemployment rate at a 17-year low of 4.1 percent. The housing industry is solid, and manufacturing is rebounding. But stock prices have climbed faster than profits in recent years.

Major economies around the world are growing in tandem for the first time since the Great Recession, and corporate profits are on the rise. The tech-heavy Nasdaq ended the day 3.9 per cent lower.

Rising deficits could drive interest rates higher.

The market didn't get much help Thursday from company earnings reports, several of which disappointed investors. The euro held steady at $1.2248.

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