Tuesday, 11 December, 2018

Stocks have their worst day in months; Dow drops 800-plus points

New York City. With bond prices dropping interest rates have been surging resulting in the Dow Jones Industrials Average falling over 200 poin Dow Falls 430 Points as Bond Yields Surge and China Tensions Grow Spencer Platt Getty Images10 Oct 2018
Priscilla Morrison | 11 October, 2018, 04:03

Tech leaders Amazon (AMZN), Facebook (FB) and Netflix (NFLX) all helped lead the market lower Wednesday while stodgier companies like food companies Smucker (SJM) and General Mills (GIS), gold miner Newmont (NEM) and bargain retailers Dollar General (DG) and Dollar Tree (DLTR) finished the day higher.

The local decline comes after the Dow Jones Industrial Average fell as much as 600 points in afternoon trading.

USA stock indexes dived around 1 percent on Wednesday as worries over China and the impact of rising Treasury yields on global growth drove falls in luxury goods companies and chipmakers. Apple and Amazon both had their worst day in two and a half years.

"It is starting to influence the local market".

The broad-based S&P 500 slumped 3.3% to end at 2,786.46, while the tech-rich Nasdaq Composite Index plummeted 4% to finish the session at 7,427.74. The benchmark index fell for the fifth straight day, which hadn't happened since just before the 2016 presidential election. As of October 10, it's lasted 3,503 days.

The Dow Jones industrial average dropped 2.2 percent, or more than 550 points. The S&P 500 was off by 1.7 percent, putting it on pace for its first five-day losing streak in two years.

After a long stretch of relative calm, the stock market has suffered sharp losses over the last week as bond yields surged. The Russell 2000 small-cap index closed down 2.9 percent. Industrial and internet companies also fell hard. Boeing lost 4 percent to $370.04 and Alphabet, Google's parent company, gave up 3.2 percent to $1,109.08. Berkshire Hathaway dipped 4.7 percent to $213.10 and reinsurer Everest Re slid 5.1 percent to $217.73. Tiffany plunged 10.2 per cent to US$110.38 and Ralph Lauren fell 8.4 per cent to US$116.96.

Earnings were a major driver of the market last quarter, and analysts see more robust results ahead, even if companies face growing issues like the yet-to-be-resolved trade war and higher raw-materials costs. But eventually the high rates worry stock investors, as higher rates tend to increase borrowing costs and cut into profit margins.

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The 10-year Treasury yield rose to 3.23 percent from 3.20 percent late Tuesday and from 3.05 percent early last week. Higher rates can slow economic growth, erode corporate profits and make investors less willing to pay high prices for stocks.

Adams, of Bloomberg Intelligence, said investors have concerns about their future profitability, too.

The S&P 500 posted 12 new 52-week highs and 47 new lows; the Nasdaq Composite recorded 12 new highs and 227 new lows.

Sears Holdings plunged 32 percent after the Wall Street Journal said the debt-laden retailer was preparing for a possible bankruptcy. The stock fell 15 per cent to 50 cents. The energy sector was close behind with a 2.9 percent loss, as oil extraction in the Gulf of Mexico shutting down due to the hurricane. Brent crude, the global standard, lost 2.2 percent to $83.09 a barrel in London. The Fed has predicted that unemployment will remain below 4 percent through 2020 and inflation is expected to track around 2 percent, conditions that Federal Reserve chief Jerome H. Powell called "remarkably positive". USA gold futures settled up $1.9, or 0.16 percent, at $1,193.4.

US gold futures settled up $1.9, or 0.16 percent, at $1,193.4.

CVS dipped 0.1 percent to $79.40 and Aetna added 0.5 percent to $204.64. Copper fell 0.9 percent to $2.78 a pound. Concerns about consumer spending have also led to jitters about USA companies as they prepare to unveil results for the third quarter of the year over the coming weeks.

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.

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