Wednesday, 17 October, 2018

Sudden jump in USA interest rates prompts Wall Street stock plunge

Shares in Facebook Amazon Apple Netflix and Google’s parent company Alphabet all fell in New York trading Shares in Facebook Amazon Apple Netflix and Google’s parent company Alphabet all fell in New York trading Credit Jason Alden Bloomberg
Lindsey Cook | 12 October, 2018, 02:50

The Nasdaq composite skidded 92.99 points, or 1.3 percent, to 7,329.06. All 30 of the Dow's stocks were in the red and it fell below 26,000 total points for the first time in a month, CNN reported. The index didn't reach 700 again until 1987.

Francis Tan, an investment strategist at UOB private bank, believes the markets will likely pick up in the USA session.

Tech stocks declined due to rising bond yields, which followed a spike in rates for the benchmark U.S. 10-Year Treasury. As the economy hums along, the Federal Reserve is expected to continue tightening after increasing rates three times this year and eight times since the financial crisis.

The 10-year Treasury note yield traded around 3.23 percent a day after hitting its highest level since 2011.

But Hogan said earnings were also a source of worry because they could showcase the consequences of Trump's trade wars for U.S. companies, from raising costs of raw materials to forcing enterprises to change supply chains.

Kinahan said investors want to know if Corporate America is anxious about the Trump administration's tariffs on Chinese imports and if it sees signs of slower economic growth.

But there were few places to hide Wednesday. "Semiconductors have the most exposure to China out of segments in the S&P 500". Even utility stocks, which tend to pay big dividends, fell slightly Wednesday.

Tom Cahill of Ventura Wealth Management said investors were unnerved by remarks from luxury company LVMH of a crackdown on some goods in China amid the country's bitter dispute with the US.

Volatility has returned with a vengeance.

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Wall Street is hoping that the worst of a brutal correction will soon be over, but today's not looking much better after Wednesday's big plunge.

And the CNNBusiness Fear & Greed Index, which looks at the VIX and several other indicators of market sentiment, plunged into Extreme Fear mode.

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 selloff is healthy", Heider said.

All three indexes hit records between August 30 and October 3, despite the escalating Sino-US trade dispute gnawing at confidence on corporate profit growth through most of the year.

The Fed has been gradually raising interest rates over the past two years, after not having increased them since the recession.

The energy sector, pressured by a drop in oil prices, was the lead decliner, while insurers were some of the biggest losers in the financial sector a day after powerful Hurricane Michael slammed into Florida.

And Geoff Alexander, the president of R. M. Davis, a wealth management firm, said he wasn't getting too nervous about Wednesday's market madness either. This slide was long overdue. But that reprieve was short-lived, as stocks headed down in the final hour of trading.

"Volatility and concern is high", Silverblatt said.

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