Markets Right Now: US stocks slump on day of wide swings

Roman Schwartz
October 12, 2018

USA stocks plunged to their worst loss in eight months on Wednesday as technology companies continued to drop.

Investors are also anxious about the ongoing trade war with China and its impact on corporate bottom lines as well as the rising threat of higher interest rates.

Technology and internet-based companies are known for their high profit margins, and many have reported explosive growth in recent years, with corresponding gains in their stock prices.

The Dow Jones Industrial Average lost 91 points, or 0.4 percent, to 25,506. The S&P 500 shed 1.53% to 2,839.43, on track for its steepest loss since June. The benchmark USA stock index hadn't suffered a five-day losing streak since November 2016, just before the presidential election.

Tech stocks and companies that sell non-essentials to consumers have been some of the top performers over the past year, gaining almost twice as much ground as the S&P 500. The Nasdaq composite, which has a high concentration of technology stocks, tumbled 316 points, or 4.1 percent, to 7,422.

Some early relief over a tame report on United States inflation gave way to renewed selling.

The S&P 500 lost 24.93 points, or 0.89 per cent, to 2,760.75 and the Nasdaq Composite dropped 30.71 points, or 0.41 per cent, to 7,391.34. Chip gear producers Applied Materials, Teradyne and ASML Holdings fell between 3.5 percent and 4.6 percent. Industrial and internet companies also fell hard.

USA markets are coming off their steepest losses in eight months.

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The pullback - particularly for tech stocks - is needed, argued Joe Heider, president of Cirrus Wealth Management. Yields on 3-year notes have recently traded just above 3.0 percent, providing long-absent competition for investment returns with equities. That's helped make technology stocks more volatile in the last few months.

Many investors now believe that the Federal Reserve's campaign to "normalize" monetary policy, reversing years of extraordinary support that included the quantitative easing bond buying program and keeping its overnight target very low, will push interest rates higher than previously thought.

The dollar index fell 0.17 percent, with the euro up 0.25 percent to $1.1518.

The dollar slipped to 112.17 Japanese yen from 112.27 yen late Wednesday.

US crude settled down $1.79 at $73.17 per barrel and Brent fell $1.91 to settle at $83.09.

Japan's Nikkei 225 added 0.2 percent, South Korea's Kospi dropped 1.1 percent and the Hang Seng in Hong Kong gained 0.1 percent.

After months of declines, the price of gold jumped by the most in two years, rising 2.9 percent to $1,227.60 an ounce.

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