Tech stocks routed in wide sell­off

China Daily (Canada) - - ACROSS AMERICASAMERICA - By WIL­LIAM HENNELLY in New York williamhen­nelly@ chi­nadai­lyusa.com

Nas­daq notches worst 1-day de­cline in 7 years; chip stocks, rate fears blamed

The Nas­daq took a pound­ing on Wednes­day as the tech­laden in­dex put in its worst day since 2011 amid a broader sell­off of US stocks.

The Nas­daq Com­pos­ite dropped 329 points, or 4.4 per­cent, to 7,108; the Dow Jones In­dus­trial Aver­age lost 608 points, or 2.4 per­cent, to 24,583; and the S&P 500 fell 85 points, or 3.1 per­cent, to 2,656.

The ac­tion con­firmed a cor­rec­tion for the Nas­daq and erased the year’s gains on the Dow and S&P 500, as dis­ap­point­ing fore­casts from chip­mak­ers and weak home-sales data raised con­cerns about eco­nomic and profit growth.

The Nas­daq closed 12.4 per­cent be­low its Aug 29 record clos­ing high and recorded its largest one-day per­cent­age drop since Aug 18, 2011. The S&P ex­tended its Oc­to­ber fall to 8.8 per­cent, the in­dex’s worst month since Fe­bru­ary 2009.

“This is re­ally off the walls,” said Don­ald Selkin, chief mar­ket strate­gist at New­bridge Se­cu­ri­ties. “Noth­ing fun­da­men­tally changed dur­ing the day. I think it’s a tech­ni­cal break­down. Look at the

Nas­daq — down 300 points.”

Ka­mal Khan, US edi­tor at In­vest­ing.com, told China Daily that “at the core of this plunge was the evap­o­ra­tion of faith in the semi­con­duc­tors, which is keep­ing tech over­all from mak­ing any kind of re­cov­ery”.

“AMD’s low­ered guid­ance af­ter the bell to­day is go­ing to make any sort of Nas­daq come­back to­mor­row a big ask. And that stock is still up 100 per­cent year to date, so there’s still plenty of room to fall.”

Soft­ware gi­ant Mi­crosoft beat Wall Street profit and rev­enue es­ti­mates on Wednes­day, driven by its cloud com­put­ing busi­ness, but Khan was skep­ti­cal about how much of a boost that would pro­vide.

“Mi­crosoft will help the Dow with its own rise, but soft­ware doesn’t have the clout chips do in the broader mar­ket,” he said. “The near-term hope for bulls is that there are enough solid num­bers be­fore the bell to­mor­row from less-sexy stocks like Cono­coPhillips and Bris­tol-My­ers to get a sta­ble open.”

Also on the earn­ings front, chip­mak­ers Texas In­stru­ments and STMi­cro­elec­tron­ics warned of slow­ing de­mand. They fol­lowed dis­ap­point­ing fore­casts on Tues­day from in­dus­trial gi­ants Cater­pil­lar and 3M.

Ford Mo­tor Co, in its thirdquar­ter earn­ings re­port on Wednes­day, said ve­hi­cle sales in China, where it lost $378 mil­lion in the quar­ter, fell 43 per­cent in Septem­ber from a year ear­lier and are down 30 per­cent in the first nine months of the year. Ford blames its weak China busi­ness on an ag­ing model lineup that is await­ing an over­haul.

“Our per­for­mance in China clearly has been dis­ap­point­ing. I can as­sure you the lead­er­ship of the com­pany has swarmed the is­sue,” Chief Ex­ec­u­tive Of­fi­cer Jim Hack­ett said on the earn­ings call.

Jim Collins, found­ing part­ner of The Port­fo­lio Guru, told China Daily that “in­vestors’ ap­petite for the mega-cap FAANGs — Face­book, Ap­ple, Ama­zon, Net­flix, Google — will de­ter­mine whether this sell­off con­tin­ues”.

“I think it was con­tin­ued fear of the im­pact of higher in­ter­est rates on the US econ­omy com­bined with prof­ittak­ing in big-cap tech stocks,” Collins said.

Sales of new US sin­gle­fam­ily homes fell to a near two-year low in Septem­ber, the lat­est sign that ris­ing mort­gage rates and higher prices were af­fect­ing de­mand for hous­ing.

The mar­ket also was sort­ing out re­ports that po­ten­tial bombs were sent to for­mer pres­i­dent Barack Obama, for­mer sec­re­tary of state Hil­lary Clin­ton and the New York head­quar­ters of CNN.

The Fed­eral Re­serve said in its lat­est re­port on the econ­omy that US fac­to­ries have raised their prices be­cause of tar­iffs.

Reuters and Bloomberg con­trib­uted to this story.

REUTERS WIL­LIAM HENNELLY / CHINA DAILY

Traders work on the floor of the New York Stock Ex­change in New York on Wednes­day. In­set: A screen dis­plays a chart of the Dow Jones In­dus­trial Aver­age. Right: The Nas­daq Mar­ket Site in Times Square in New York is pic­tured af­ter the Nas­daq’s worst one-day per­for­mance in more than seven years.

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