Markets Right Now: Dow sinks 800 as tech companies swoon

Irving Hamilton
October 11, 2018

The Dow Jones Industrial Average plunged more than 800 points, its worst drop in eight months, led by sharp declines in technology stocks.

Rising bond yields have been drawing investors out of the stock market, and the best-performing stocks over the past year took some of the biggest losses on Wednesday.

"After five down days, institutional investors have to act", Michael Antonelli, managing director at Robert W. Baird, told The Post, explaining the acceleration of Wednesday's sell-off. Boeing lost 4 percent to $370.04 and Alphabet, Google's parent company, gave up 3.2 percent to $1,109.08.

The CBOE Volatility Index.VIX, Wall Street's "fear gauge", rose 7 points, or almost 44 percent, to 22.96, going above 20 for the first time since April 11 and hitting its highest close since April 2. "As stocks go down, tech goes down more than the stock market", she said.

U.S. markets mirrored risk-off sentiment around the globe, with European stocks having also ended sharply lower. 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.

USA long-dated Treasury yields rose again in extension of a trend over the last few weeks fueled by solid US economic data that reinforced expectations of multiple interest rate hikes over the next 12 months.

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.

United States 10-year Treasuries, a closely-watched indicator of bond yields, hit a seven year high of 3.26pc on Wednesday. It was at just 3.05 percent early last week. Copper fell 0.9 percent to $2.78 a pound. Brent crude, the global standard, lost 65 cents to $84.35.

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Wholesale gasoline shed 2.7 percent to $2.02 a gallon.

The S&P 500 fell 39 points, or 1.4 percent, to 2,840. Natural gas rose 0.6 percent to $3.28 per 1,000 cubic feet. USA gold futures settled up $1.9, or 0.16 percent, at $1,193.4.

The CBOE Volatility Index, Wall Street's "fear gauge", rose 2.5 points, gaining for the fifth straight session to hit its highest since June 25.

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. As bond yields rise, risk-averse investors-ranging from the proverbial cautious retiree to very big pension funds-become more willing to park more money in bonds and collect the interest.

The CAC 40 in France dropped 1.5 percent, Germany's DAX lost 1.2 percent and the FTSE 100 in London slipped 0.4 percent.

The turmoil came a day after the International Monetary Fund slashed its global growth forecast on worries about trade wars and weakness in emerging markets. Brazil's Bovespa lost 2.5 percent and the Merval in Argentina sank 2.2 percent.

CURRENCIES: The dollar held steady at 113.05 Japanese yen.

In London, the FTSE 100 was down by 1% as hopes of a Brexit deal lifted the pound - weakening the sterling value of earnings for numerous global index's multinational constituents.

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