Tech stocks hammered as markets drop again
Dow Jones Industrial Average plummets more than 600 points
Another torrent of selling gripped Wall Street on Wednesday, sending the Dow Jones Industrial Average plummeting more than 600 points and extending a losing streak for the benchmark S&P 500 index to a sixth day.
The Nasdaq composite, with a roster chock-a-block with tech stocks, bore the brunt of the selloff, leaving it more than 10 percent below its August peak, what Wall Street calls a “correction.”
“Investors are on pins and needles,” said Erik Davidson, chief investment officer at Wells Fargo Private Bank. “There has definitely been a change in sentiment for investors starting with the volatility we had last week. The sentiment and the outlook seems to be turning more negative, or at the very least, less rosy.”
Investors have grown concerned in recent weeks that corporate America’s tax cut-fueled earnings growth this year will be arrested in coming months amid rising inflation, uncertainty over the escalating trade conflict between the U.S. and China and the likelihood of higher interest rates. Recent data showing the housing market is slowing have also fueled speculation that U.S. economic growth will start to slow next year.
The outlooks from some of the companies that reported thirdquarter results this week, including Caterpillar, 3M and United Parcel Service, only stoked those worries.
“You’ve seen more discouraging [company] commentary this quarter than you have the last two,” said Tom Martin, senior portfolio manager with Globalt
Investments. “You’re really starting to get more of a groundswell of caution. There’s some concern about the fourth quarter and what that’s going to look like.”
The S&P 500 lost 84.59 points, or 3.1 percent, to 2,656.10. The index is off about 9.4 percent from its Sept. 20 peak.
The Dow tumbled 608.01 points, or 2.4 percent, to 24,583.42. The tech-heavy Nasdaq slid 329.14 points, or 4.4 percent, to 7,108.40. That’s the Nasdaq’s biggest drop since August 2011.
The Russell 2000 index of smaller-company stocks gave up 57.89 points, or 3.8 percent, to 1,468.70.
The bad day hit publicly traded companies in Pittsburgh, where 44 of 49 companies tracked by the Post-Gazette/Bloomberg index were pushed into the red. Locally, energy, industrials and manufacturing took the biggest hits, and financial firms, retail and consumer goods companies fared better.
The biggest laggards included Indiana, Pa.-based First Commonwealth Financial Corp., which dropped 18 percent. Health and wellness retailer GNC fell 12 percent, while Alcoa, Universal Stainless, Koppers and AK Steel fell by between 7 to 9 percent each.
NiSource, the corporate parent of Canonsburg-based Columbia Gas of Pennsylvania, rose 3.5 percent. FirstEnergy was up 1 percent and South Side retailer American Eagle Outfitters rose two-tenths of 1 percent.
Technology stocks and media and communications companies accounted for much of the selling nationally. Banks, health care and industrial companies also took heavy losses, outweighing gains by utilities and other high-dividend stocks.
Most companies that missed earnings expectations or issued cautionary outlooks were punished.
AT&T sank after reporting weak subscriber numbers, and chipmaker Texas Instruments fell sharply after reporting slumping demand.
Shares in iRobot plunged 12.3 percent to $80.49 after the robotics technology company said tariffs will reduce its profitability in the fourth quarter.
About 24 percent of the companies in the S&P 500 had reported third-quarter results as of Wednesday. Of those, 57 percent delivered earnings and revenue results that topped Wall Street’s forecasts.
The Commerce Department said sales of new U.S. homes plunged 5.5 percent in September, the fourth monthly drop. The report is the latest sign that the housing market is cooling amid rising mortgage rates. Several homebuilders declined following the release of the report. Beazer Homes USA slumped 8.4 percent to $8.44.
Despite the tumbling stock prices, the U.S. economy looks solid. Helped by tax cuts, the economy expanded at a 4.2 percent annual pace from April through June, fastest in nearly four years. When the Commerce Department report on third-quarter growth comes out Friday, it’s expected to show another solid pickup of 3.3 percent. Unemployment has dropped to a 49-year-low 3.7 percent.