Updated at 4:45 p.m. ET
U.S. stock markets fell sharply Thursday, with the Dow Jones industrial average tumbling 1,033 points, or 4 percent, to 23,860.
Other major stock indexes also dropped Thursday. The S&P 500 fell 101 points, or 3.8 percent, and the Nasdaq index fell 275 points, or 3.9 percent.
With the latest drops, both the Dow and the broader S&P 500 are down more than 10 percent from their peaks on Jan. 26, which constitutes a market correction.
The market is still trying to find its footing after Monday's huge meltdown, when the Dow fell 1,175 points — a one-day record.
Wall Street has been on a roller coaster ride. On Tuesday, the market regained close to half of its deep Monday loss, but on Wednesday the market ended down again.
At Thursday's opening bell, it bounced from positive to negative, then headed down sharply.
The "sell-off has now corrected prices back to the level that preceded the passage of the tax bill" in December, said David Kotok, chairman of Cumberland Advisors. Enthusiasm about a corporate tax cut had helped drive the stock market to record levels.
Several factors are contributing to the return of neck-wrenching volatility this week after years of absence in the market. In fact, investors had devised very profitable investment products that allowed them to bet that volatility would remain low. Those bets against market volatility blew up on Monday.
As investors in those products ran for the exits and starting selling stocks to cover their bets, they triggered a cascade of automated selling. Kotok says it's not clear but the sell-off of those positions may still be fueling the current market downdraft.
Worries about future inflation and rising interest rates also weighed on the market again Thursday. Investors are concerned that growing budget deficits caused by the big tax cut and the pending congressional budget deal are pushing rates up.
The Congressional Budget Office says the two-year budget deal will add $320 billion of spending. Investors worry stimulus from the tax cuts and the added government spending will overheat an already strong economy, pushing up wages and prices and sparking inflation. That would create a negative environment for stocks.
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U.S. stocks fell sharply again today. For the second time this week, the Dow Jones Industrial Average was down more than a thousand points, 4.1 percent. NPR's John Ydstie reports that the market is still trying to find its footing after a similar meltdown on Monday.
JOHN YDSTIE, BYLINE: The market did regained close to half its deep Monday loss on Tuesday. And on Wednesday, it recorded a smaller loss. But today, just after the opening bell, it headed down sharply. Several attempts to rally failed, and it dived steeply in the final hour of the session, ending down nearly 1,033 points.
DAVID KOTOK: Selling is now overdone.
YDSTIE: That's David Kotok, chairman of Cumberland Advisors.
KOTOK: This stock market sell-off has now corrected prices back to the level that preceded the passage of the tax bill.
YDSTIE: Enthusiasm about a corporate tax cut had helped drive the stock market up a whopping 7 percent in January to a record high. Lots of market analysts and investors feared that the market had become overvalued. And today, many said the panic selling was a sign of those fears playing out. Today's losses put stocks in what experts call correction territory - technically speaking, a loss of 10 percent or more. Kotok says his firm is now strategically buying stocks again. But, he says, there are still valid concerns weighing on the market.
KOTOK: It's the near-term questions about the Federal Reserve, and it's the near term questions about interest rate policy that are impacting the market negatively.
YDSTIE: The near-term questions about the Federal Reserve revolve around whether it will raise interest rates more quickly in response to an economy that appears to be gaining strength. But Kotok says it's difficult to answer that question because there are several open seats on the Fed's governing board, and there's no way to know the views of the people who will ultimately fill those seats. That makes the market nervous.
But even without added moves by the Fed, rates on the 10-year U.S. Treasury, a benchmark for consumer rates, have risen sharply. Those rising rates create a more negative environment for stocks. And some analysts have blamed deficit concerns for the plunge in the market this week, including hundreds of billions being added to the deficits by the pending two-year budget deal in Congress. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.