Wednesday, 24 October, 2018

US Market Indexes Fall Further, Dow Closes With -3.15% Loss

The Dow tumbles more than 400 points Dow Falls 430 Points as Bond Yields Surge and China Tensions Grow
Priscilla Morrison | 11 October, 2018, 20:11

MSCI's gauge of stock performance in 47 countries fell 2.2 percent, the pan-European FTSEurofirst 300 index of leading regional share lost 2.1 percent.

At 11:16 a.m. ET the Dow was down 333.92 points, or 1.30 percent, at 25,264.82, the S&P was down 37.07 points, or 1.33 percent, at 2,748.61 and the Nasdaq Composite was down 72.61 points, or 0.98 percent, at 7,349.44. The benchmark USA stock index hadn't suffered a five-day losing streak since November 2016, just before the presidential election.

Apple and Amazon, the two most valuable companies in the S&P 500, each had their worst day in 2½ years.

Alibaba dropped 4.1 percent after Morgan Stanley and Raymond James cut their near-term profit estimates on the Chinese e-commerce company, citing a softer economic environment in China.

Amazon shares declined 6.2% on Wednesday.

Asian markets were broadly lower on Thursday after Wall Street slumped on a heavy selling of technology and internet stocks. Boeing lost 4.7 percent to $367.47 and Alphabet, Google's parent company, gave up 5 percent to $1,081.22.

Stock prices have been hurt by rising interest rates, which have boosted Treasury yields over the last week.

The increase in yields from these bonds - which are parcels of U.S. government debt - can hurt stocks since they will provide competition for investors' cash.

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

Insurance companies dropped as Hurricane Michael continued to gather strength and came ashore in Florida bringing winds of up to 155 miles per hour. The Nasdaq composite dropped 173, or 2.2 percent, to 7,565. Those rates have been climbing after several encouraging reports on the economy.

"If investors are going to take profits then it will be from some of the bigger, high-growth names", Nauman said.

Markets have sold off in recent days as the rate on the 10-year Treasury note flirted with 3.2 percent - its highest level in seven years. It was at just 3.05% early last week and 2.82% in late August. That's helped make technology stocks more volatile in the last few months.

Stocks and bonds traditionally have been in a tug of war for capital, but for the past 10 years bonds have had one arm tied behind their back, said Jack Ablin, chief investment officer and founding partner at Cresset Wealth Advisors in Chicago.

The bull market that began in 2009 soon after the Federal Reserve, European Central Bank and the Bank of Japan added more liquidity with their historically low-interest rates and bond purchases began to lose shine after the Fed increased fund rates three times in a year.

Earlier on Wednesday, Sears Holdings plunged on reports that the struggling retailer is preparing to file for bankruptcy. Sears has closed hundreds of stores and sold several famous brands or put them on the block as it sees more customers abandon its stores.

United States crude settled down $1.79 at $73.17 per barrel and Brent fell $1.91 to settle at $83.09. The euro rose to $1.1525 from $1.1496. Silver dipped 0.5 per cent to $14.33 an ounce.

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