NY bourse tum­bles as S&P 500 dives 3.3% while Dow dips 3.1%

Business World - - World Markets -

NEW YORK — US stocks tum­bled on Wed­nes­day, with the S&P 500 and the Dow mark­ing their big­gest daily de­clines since Feb. 8, and tech­nol­ogy stocks were at the cen­ter of the car­nage as ris­ing US Trea­sury yields sent in­vestors flee­ing from risky as­sets.

US 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.

In­vestors also wor­ried about the im­pact of trade ten­sions on cor­po­rate prof­its and Hur­ri­cane Michael’s land­fall in Florida adding to the un­cer­tainty.

The Nas­daq reg­is­tered its big­gest daily drop since June 24, 2016, hurt by tech­nol­ogy stocks which had their big­gest one-day drop since Au­gust 2011. The S&P 500 ended the day down 3.3%, rep­re­sent­ing a 4.95% drop from its Sept. 20 record clos­ing high.

“It’s a bit of a blood bath to­day, clear risk-off action with few places to hide. Gold is up a lit­tle bit. The Vix is up more sub­stan­tially,” said Ed Camp­bell, se­nior port­fo­lio man­ager at QMA, the as­set man­age­ment branch of Pru­den­tial Fi­nan­cial.

“It’s pri­mar­ily the cu­mu­la­tive ef­fect of in­ter­est rate moves over the past five days and news re­ports about trade im­pact­ing com­pa­nies,” he said. “We saw stocks hang­ing in there pretty good as in­ter­est rates were mov­ing and now they’re start­ing to crack. Mar­kets are start­ing to con­tem­plate that this could be a Fed that’s over-zeal­ous in terms of in­ter­est rate hikes.”

The Dow Jones In­dus­trial Aver­age fell 831.83 points or 3.15% to 25,598.74; the S&P 500 lost 94.66 points or 3.29%, to 2,785.68; and the Nas­daq Com­pos­ite dropped 315.97 points or 4.08% to 7,422.05.

All three in­dexes had hit records be­tween Aug. 30 and Oct. 3. The Rus­sell 2000 small-cap in­dex closed down 2.9%.

Mona Ma­ha­jan, US in­vest­ment strate­gist at Al­lianz Global In­vestors in New York, said the mar­ket could po­ten­tially sell off as much as 10% from its records be­fore ad­vanc­ing again.

“The mar­ket is di­gest­ing the po­ten­tial that rates mov­ing up­wards even­tu­ally seep into the real econ­omy in the form of mort­gage rates, auto rates, stu­dent lend­ing rates,” Ms. Ma­ha­jan said. “What we’re see­ing here is the mar­ket po­si­tion­ing for po­ten­tial lower growth.”

But as­sum­ing eco­nomic growth stays in­tact, “this could be an in­ter­est­ing buy­ing op­por­tu­nity,” ac­cord­ing to Ms. Ma­ha­jan, who said eq­uity mar­kets tend to per­form well in the six months af­ter US midterm elec­tions.

The S&P tech­nol­ogy sec­tor dropped 4.8%, with Ap­ple, Inc. cre­at­ing the big­gest drag with a 4.6% de­cline.

The com­mu­ni­ca­tions ser­vices, con­sumer dis­cre­tionary, en­ergy and in­dus­trial sec­tors all showed de­clines of more than 3%.

The en­ergy sec­tor was one of the big­gest losers for much of the day as US oil pro­duc­tion was dec­i­mated while the in­dus­try waited out Hur­ri­cane Michael.

The CBOE Volatil­ity In­dex, Wall Street’s “fear gauge,” rose 7 points, or nearly 44%, to 22.96, go­ing above 20 for the first time since April 11 and hit­ting its high­est close since April 2.

The best per­former in the sea of red was the de­fen­sive util­i­ties sec­tor, which closed down 0.5%.

Tim Ghriskey, chief in­vest­ment strate­gist at In­ver­ness Coun­sel in New York said risk par­ity funds could have made the sell-off more pro­nounced.

“Risk par­ity has in­flu­ence in any mar­ket by ac­cen­tu­at­ing the change in as­set class ex­po­sure,” said Mr. Ghriskey.

De­clin­ing is­sues out­num­bered ad­vanc­ing ones on the NYSE by a 7.27-to-1 ra­tio; on Nas­daq, a 7.05to-1 ra­tio fa­vored de­clin­ers.

The S&P 500 posted 12 new 52-week highs and 47 new lows; the Nas­daq Com­pos­ite recorded 12 new highs and 227 new lows.

On US ex­changes 9.86 bil­lion shares changed hands com­pared with the 7.42 bil­lion aver­age for the last 20 trad­ing ses­sions. —


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