Stock prices plummet amid tech selloff, rising interest rates

Mae Love
October 11, 2018

Tech stocks declined due to rising bond yields, which followed a spike in rates for the benchmark USA 10-Year Treasury. That was its biggest loss since March 22.

Alec Young, managing director of global markets research at FTSE Russell, said investors fear that rising interest rates and growing expenses are going to erode company profits next year. Earnings season should improve investors' moods through the end of the year, he writes, with a cycle peak in 2020 and the next major low not due until 2020. "As stocks go down, tech goes down more than the stock market". This caused the Dow to suffer through its worst day in over eight months itself.

During the regular session, the S&P 500 marked its biggest daily percentage fall since February 8 - 3.3 percent - and Nasdaq registered its biggest fall since June 24, 2016 - 4.1 percent - as rising U.S. Treasury yields sent investors fleeing from risky assets.

Meanwhile, the tech-heavy Nasdaq has lost 4.1 per cent to 7,422.

The S&P 500 fell nearly 92 points, or just over 3 percent, the biggest daily loss since February this year.

Bond yields have risen in recent days after the US Federal Reserve made it clear it will increase the central bank rate again after strong job growth figures. That didn't happen Wednesday as stocks fell further late in the day.

New York's Dow Jones Industrial Average fell 3%, or more than 800 points, in Wednesday trading.

In technology, Microsoft dropped 3.1 per cent to US$108.76 Wednesday and Nvidia lost 4.7 per cent to US$253.13.

The Dow was down 482 points, or 1.8 percent, to 25,950.

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Tom Cahill of Ventura Wealth Management said investors were also unnerved by remarks from luxury company LVMH of a crackdown on some goods in China amid the country's bitter dispute with the United States. In retail, Amazon sank 3.6 per cent to US$1803 and Nike gave up 4.4 per cent to US$76.87. Berkshire Hathaway dipped 4.1 per cent to $214.64 and reinsurer Everest Re slid 4.6 per cent to $218.97. The two-year yield rose to 2.88 percent from 2.87 percent, and the 30-year yield climbed to 3.38 percent from 3.37 percent.

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.

The 10-year Treasury note yield traded around 3.23 percent, while the two-year yield reached its highest mark since 2008. Intel dipped 3.76 percent today but that might be viewed lightly when you look at team Red and team Green's day on the market.

Stocks are opening broadly lower on Wall Street led by drops in technology and industrial companies. And tech stocks were getting hit particularly hard.

Rising government bond yields have made them more attractive, leading investors to pull money out of equities.

"Amazon recently announced they were increasing wages, Facebook is spending a ton on security", she said. "Semiconductors have the most exposure to China out of segments in the S&P 500".

Sears nosedived after the Wall Street Journal reported that the struggling retailer hired an advisory firm to prepare a bankruptcy filing that could come within days.

Trade-sensitive industrial stocks also fell as tensions between Washington and Beijing persisted. It was more than US$40 five years ago. Over the years, Sears has closed hundreds of stores and sold several famous brands.

Boeing shed 3.3 per cent to US$372.58 and 3M fell 2.2 per cent to US$205.77. Brent crude, the worldwide standard, lost 2.2 per cent to $83.09 a barrel in London.

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