CORRECTION MURK

Dow bubble deflates as marts fall 1,033 points

Just when many thought US stocks had hit a new bottom — another trap door opens.

The Dow Jones industrial average plunged 1,032.89 points, or 4.1 percent, on Thursday, to 23,860.46 — the first time the blue chip index of 30 stocks closed below 24,000 since late November.

The sell-off left the index — plus the S&P 500, which fell 3.8 percent, to 2,581 — in correction territory, that is, off 10 percent from its recent high.

It is hard to believe the suddenness and viciousness of the Dow downturn — falling 2,325 points in just five days.

“We’ve gone from investor euphoria where every day [through almost all of January] was a mad rush to buy stocks to investor despair where people can’t wait to get out of the stock market,” Chris Zaccarelli, chief investment officer of Independent Advisor Alliance, told The Post in an e-mail.

Thursday’s trading action, in which the Dow shed 4.1 percent, puts the index in correction territory, a dubious distinction.

The technology-heavy Nasdaq index flirted with correction territory, closing down 274.82 points, at 6,777.16 — or more than 9 percent below its Jan. 26 peak.

Markets started the day in red but the losses accelerated in the afternoon trading session as the Dow quickly plunged 500 points, then 600, 700, and finally all the way to 1,000 points in the last few minutes of trading.

The accelerated selling in afternoon sessions was likely due to market-close orders by large institutional investors.

“This could be the result of retail investors abandoning mutual funds, which would require those institutions to do large block trades to reduce their long stock positions,” said Zaccarelli, who is based in Charlotte, NC.

The broader Wall Street bloodbath began Friday — with the Dow plunging an ominous 666 points — after the Labor Department reported that hourly wages had their largest increase since June 2009.

This sent markets into a panic for the first time in 15 months as interest rates rose on inflation fears.

“The large change in sentiment is interest-rate-related with 10-year treasury yields moving sharply higher this year on inflation and growth concerns,” Zaccarelli said.

Rates on the 10-year stood at 2.85 percent Thursday — near a four-year high.

“This [market] tarnish is likely to continue until we get a short-term top on the 10-year,” Peter Cardillo, chief market economist at First Standard Financial, told The Post.

Rising interest rates usually mean that investors shift from stocks to bonds.

Many on Wall Street were quick to point out that corrections are part of the usual ebb and flow of the market — even though they’re also nausea-inducing.

“As much as the decline is steep, it’s pretty ordinary,” Cardillo said.

“The economy remains strong, the fundamentals are solid and just like the market overshot to the upside during the euphoria, it’s likely to overshoot to the downside during this multiday selloff,” Zaccarelli said.