Wipeout on Wall Street as shares around world tumble
SHARES in Wall Street suffered their biggest falls in months last night as investors fretted about interest rates, inflation and the global economy.
The Dow Jones Industrial Average index plummeted by more than 800 points – one of the worst sell-offs since February.
Apple and Amazon had their worst day in two years.
Traders rushed to sell technology stocks that have seen massive rises this year and piled into safer bets such as utilities and consumer staple firms.
The S&P 500 index also lurched into its longest losing streak in two years, while London’s FTSE 100 sank to a six-month low.
The turmoil came amid fears that sharply-rising interest rates in the United States, set by the Federal Reserve, would put the brakes on the country’s expanding economy.
Higher rates make borrowing more expensive for governments, businesses and consumers. There are also concerns about ongoing trade disputes and the International Monetary Fund has sounded the alarm about ‘dangerous undercurrents’ – including £138trillion of global debt.
Alec Young, a director at FTSE Russell, said investors feared that rising interest rates and growing expenses would start eating into company profits, which had been boosted by tax cuts introduced by Donald Trump.
He added: ‘ The tax cuts juiced earnings this year and that’s not sustainable. The market’s starting to say that the glass may be half empty.’
Michael Farr, of Farr, Miller & Washington, added: ‘Stocks are spooked by higher rates and maybe some inflation that seems to be creeping in. That suggests the Fed will keep raising rates, and that’s taking the wind out of the stocks that have done the most.’
Markets in the US have done better than expected this year, setting a series of new records over the summer.
However, after that stretch of relative calm, they have suffered sharp losses over the past week as bond yields have risen. On most days they have recovered some of their losses but that did not happen on Wednesday, when stocks fell further.’
Billions of dollars were wiped off the value of America’s biggest technology companies, with Apple, Amazon, Netflix, Microsoft and Alphabet, Google’s parent company, among the big losers.
Gina Martin Adams, chief
‘Sounded the alarm’
equity strategist for Bloomberg Intelligence, said this was partly because of fears these companies could face higher costs. She said: ‘Amazon recently announced they were increasing wages, Facebook is spending on security.’
David Madden, a market analyst at CMC Markets UK, said: ‘ Continued concerns about the political situation in Italy, and the relatively high yields on US government bonds, and the strained global trading relations have all contributed to the decline in European stocks.’