ARI SHAPIRO, HOST:
It has been a long time since the stock market has seen a day as bad as this one. The Dow Jones Industrial Average fell 666 points. That is a 2 and a half percent drop. And it caps off a pretty bad week on Wall Street. NPR's Jim Zarroli is going to explain to us what's happening. Hi, Jim.
JIM ZARROLI, BYLINE: Hi, Ari.
SHAPIRO: The story all year has been record highs in the stock market. What's going on?
ZARROLI: Yeah. The stock market has been on a tear. I mean, the Dow is up 25 percent last year. Then it just kept blowing past, you know, 24,000, 25,000, 26,000. President Trump is bragging about how well the stock market has done. And this week, it just seemed like, you know, this giant bucket of cold water was thrown in everybody's face. And that really intensified today. All these big stocks like ExxonMobil, Goldman Sachs, Apple - they were all down. And it wasn't just stocks. It was bonds. It was commodities like oil. It was just - you know, it was your basic bloodbath.
SHAPIRO: And one of the things that makes it so weird is that the day started with pretty good economic news - employers adding jobs, average hourly earnings rising. So can you explain what accounts for the steep drop-off?
ZARROLI: Yeah. I think the jobs report was actually part of the problem today, not that it was bad. I mean, it was actually solid. But the wage gains were a problem. They have a lot of investors wondering, you know, are we going too fast? Are we going to see more inflation? You know, the Fed is already raising interest rates. Does that mean it's going to raise them even faster?
Then you have these big tax cuts taking effect, which means people could be spending more. The government's going to have to borrow more. What's that going to mean? So I think there's just this more cautious outlook at least about inflation and that the jobs report just poured gasoline on the fire.
SHAPIRO: It's kind of counterintuitive that for a long time people have been saying, yeah, the stock market's great, but wages aren't going up. And now wages go up. And the stock market drops.
SHAPIRO: Could political events have any impact on this, be part of the reason behind it? Of course this memo story is just blowing up Washington today. Could that be one of the factors?
ZARROLI: I don't think so. I mean, the memo was released in the morning. And the real - the drop today in the stocks really intensified later in the day, in the afternoon. So if there's a connection, it's hard to see. In fact, you know, you could say the markets have generally been shrugging off this Russia investigation. The markets are supposed to hate instability. You always hear that. And of course this is nothing if not an unpredictable time. But, you know, this investigation has been going on for months, and stock prices have just been going up and up and up almost regardless of that.
SHAPIRO: Put this in perspective for us. We said it was a 666-point drop. That sounds like a lot - 2 and a half percentage points. How bad is this?
ZARROLI: Well, you know, we need to keep it in perspective. This is one bad week. Stocks are still up for the year. The stock market was really due to come down anyway. I mean, we have these corrections. They're normal. You can't have stocks rising at these levels all the time. The economy is still growing. We have a very tight job market. Companies are reporting good profits.
But we are - you know, as I said, we're starting to see the mood shift a little bit. Interest rates have come up. They rose quite a bit today. The yield on the 10-year bond was up a lot. They're still not high in historic terms, but they are rising, and that does have an effect on the economy. That affects people's mortgages and auto loans. It affects credit cards. So, you know, people have been feeling really optimistic for a long time about where the economy is going, especially in the past year. But I think days like this are just kind of a reminder, you know, the sky is not the limit.
SHAPIRO: A reality check there from NPR's Jim Zarroli. Thanks a lot.
ZARROLI: You're welcome. Transcript provided by NPR, Copyright NPR.