Thursday, 18 October, 2018

Dow falls 832 points in third-worst day by points ever

Nellie Chapman | 11 October, 2018, 05:28

Apple, Boeing, Nike and Visa all tumbled more than 4 per cent, while Caterpillar and 3M lost nearly 4 per cent.

Tech stocks including Netflix and Google led the massive falls in the US.

The Dow Jones industrial average had its second-biggest drop of the year, plunging almost 500 points, or 1.9 percent, shortly after 2:00 p.m.

Gina Martin Adams, the chief equity strategist for Bloomberg Intelligence, said investors were concerned about the big increase in yields, which makes it more expensive to borrow money. The move particularly affects high-growth tech companies which have been a source of huge returns in recent months.

That all played into a market that is increasingly anxious about global growth after warnings from the International Monetary Fund this week and a rise in Treasury yields to a more than 7-year high above 3 percent that signals a tightening of available capital globally. Concerns about consumer spending have also led to jitters about United States companies as they prepare to unveil results for the third quarter of the year over the coming weeks. It's fallen sharply over the past five days. The Nasdaq fell 315 points, or 4.1 percent, to 7,422.

All 30 Dow stocks were in the red, sending the index below 26,000 points for the first time in a month.

The biggest driver for the market over the last week has been interest rates, which began spurting higher following several encouraging reports on the economy.

"Both companies highlighted rising costs, not only input costs but increasing operating expenses [and] marketing expenses", she said.

Trump often points to a strong economy and rising stock market as proof his tax and fiscal policies are working.

Insurance companies dropped as Hurricane Michael continued to gather strength and came ashore in Florida bringing winds of up to 155 miles per hour.

Investors are leaning into safer stocks with steady dividends - utilities and consumer staples - and pulling out of the higher-paying, higher-risk stocks as other guideposts of growth, like the communication sector, tumbled.

Every S&P 500 sector fell heavily, with big-name technology stocks like Facebook and Apple among the biggest drags on the U.S. market. A severe sell-off in technology stocks has pushed the front-month VIX futures contract to a premium relative to the second-month contract.

Elsewhere, shares of Sears plummeted more than 37% after reports the cash-strapped retailer could file for bankruptcy protection as soon as this week. The Fed aims to raise rates to about 3 percent. Industrial and internet companies also fell hard.

Since Sept 10, the yield on the 10-year U.S. Treasury note is up about 28 basis points, including a big spike last week. Over the years, Sears has closed hundreds of stores and sold several famous brands.

Wholesale gasoline shed 2.7 per cent to $2.02 a gallon.

South Korea's Kospi dropped 1.1 per cent, the CAC 40 in France dropped 2.1 per cent, Germany's DAX lost 2.2 per cent and the FTSE 100 in London fell 1.3 per cent. Many stock-market observers pin the start of the current bull market, the longest since World War II, at March 9, 2009. Investors see many of these countries as being vulnerable to higher USA interest rates, which can pull away investment dollars. Brazil's Bovespa lost 2.5 per cent and the Merval in Argentina sank 2.2 per cent.