Dow drops, tech companies plunge
NEW YORK — U.S. stocks plunged Wednesday as investors, fearful that rising interest rates and trade tensions could hurt company profits, ramped up their selling of high-flying technology and internet stocks. The Dow Jones Industrial Average fell 831 points, its worst loss in eight months.
The losses were widespread, and stocks that have been the biggest winners on the market suffered steep declines. Apple and Amazon, the two most valuable companies in the S&P 500, each had their worst day in two and a half years.
The Nasdaq composite, which has a high concentration of technology companies, sustained its biggest loss in more than two years and has dropped almost 8 percent since the start of October.
Wednesday’s drop should be placed in perspective. Since early 2009, the S&P 500 has quadrupled, driven higher by the U.S. economic expansion, hefty profits for corporations and historically low interest rates, all of which makes stocks an attractive investment.
Stocks have slumped over the last week, largely due to worries over rising interest rates. The Federal Reserve recently raised short-term interest rates for the third time this year. Strong economic data and a positive outlook from Fed officials last week sent bond yields sharply higher and sparked concerns about even higher interest rates.
Big moves in interest rates tend to unsettle investors, and they can also push them to sell stocks and buy bonds instead. And there is still an overhang from the U.S. trade dispute with China, which accounts for sizeable portions of some tech companies’ revenue.
Alec Young, managing director of global markets research at FTSE Russell, said investors fear that rising interest rates and growing expenses are going to erode the boost company profits have gotten from the GOP tax overhaul.
“The tax cuts juiced earnings this year and that’s not sustainable,” he said. “The market’s starting to say that the glass may be half empty.”
President Trump reiterated those concerns Wednesday. Trump told reporters after landing in Erie, Pennsylvania, for a campaign rally that he believes the Fed “is making a mistake” with its campaign of rate increases.
“I think the Fed has gone crazy,” he said. At the same time, Trump called Wednesday’s market plunge “a correction we’ve been waiting for for a long time.”