Dow drops, tech com­pa­nies plunge

Yuma Sun - - OPINION -

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.”

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.