Thursday, 13 December, 2018


Dow drops 545 points as stock market slide continues

Sudden jump in US interest rates prompts Wall Street stock plunge The broad-based S&P 500 slumped 3.3 percent to end at 2,786.46
Conrad Doyle | 12 October, 2018, 01:32

A surge in Treasury yields appears to be fueling the losses, as the 10-year US Treasury yield spiked last month and has continued to climb throughout October, landing at 3.21 per cent.

Shares in Facebook, Amazon, Apple, Netflix and Google's parent company Alphabet - the so-called "FAANG" stocks that have driven United States markets to all-time highs recently - all fell in NY trading.

The 10-year Treasury yield rose to 3.22 percent from 3.20 percent late Tuesday after earlier touching 3.24 percent.

The S&P 500 was down 55 points, or 1.9 percent, at 2,824-on pace for its worst day since June.

The Dow Jones Industrial Average was down another 150 points in early trading as investor concerns over rising interest rates and the trade war with China continue to mount, but rebounded quickly, moving into positive territory within 25 minutes as bargain hunters emerged.

"The #MAGA theme is unraveling a bit over the past few sessions as two-sided risks have been injected into the USA equity market", Mark McCormick, head of North American FX strategy at TD Securities, wrote in an email. And if history is any guide, we won't have to endure too much, as the S&P has been up an average of 14.5% a year after all midterm elections going back to 1946, while all 18 midterms saw higher returns 12 months later, he notes. Heating oil fell 1.2 per cent to $2.39 a gallon.

Gina Martin Adams, the chief equity strategist for Bloomberg Intelligence, said investors are concerned about the big increase in yields, which makes it more expensive to borrow money.

Shares in upscale jewellery retailer Tiffany & Co and perfume maker Estee Lauder both fell 7 percent after a warning from French luxury goods firm LVMH about softening demand in China. The Russell 2000 index of smaller-company stocks fell 30.03 points, or 1.9 percent, to 1,545.38.

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. But higher interest rates can slow economic growth and erode corporate profits.

Amazon shares declined 6.2% on Wednesday.

"If the Feds are insane, this market reaction is bordering on insanity, as so many negative crosscurrents collide that is merely impossible to find a glint of optimism", he added. The Nasdaq composite rose 15 points, or 0.2 percent, to 7,436.

Asia stock indexes added to the global market's pain on Thursday, with benchmarks in Shanghai, Shenzhen and Tokyo all skidding between 4 and 5 percent.

The Cboe Volatility Index, a measure of expected volatility on the S&P 500, gained more than 11% to 25.50 and held close to its highest level since February.

The dollar fell to 111.94 yen from 112.59 yen, and the euro rose to $1.1594 from $1.1525.

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