Dow Jones closes down more than 800 points

Lloyd Doyle
Октября 11, 2018

Companies that have been the biggest winners on the market the last few years, including technology companies and retailers, suffered steep declines.

In the background, long-term interest rates for US Treasury bonds have surged to their highest levels since 2011, leading to a dramatic fall in risk appetite for the stock market. Apple and Amazon both had their worst day in two and a half years. "As stocks go down, tech goes down more than the stock market", she said. This caused the Dow to suffer through its worst day in over eight months itself.

The S&P 500 index sank 95 points, or 3.3 percent, to 2,786, its fifth straight drop. The benchmark USA stock index hadn't suffered a five-day losing streak since November 2016, just before the presidential election. The S&P 500 dropped 0.6%, and the technology-heavy Nasdaq Composite declined 1%.

The Dow Jones Industrial Average gave up 831.83 points, or 3.1 per cent, to 25,598.74.

In Canada, the S&P/TSX composite index was down 238.87 points or 1.51 per cent, to 15,615.18. The price of the bond with the lower interest rate, known as its coupon, will fall enough to raise the yield to mirror the higher rate.

That's helped make technology stocks more volatile in the last few months.

In the US, technology stocks were among the biggest drags on major indexes.

In technology, Microsoft dropped 3.1 per cent to US$108.76 Wednesday and Nvidia lost 4.7 per cent to US$253.13. Industrial and internet companies also fell hard.

Insurance companies dropped as Hurricane Michael continued to gather strength and came ashore in Florida bringing winds of up to 155 miles an hour. Berkshire Hathaway dipped 4.1 per cent to $214.64 and reinsurer Everest Re slid 4.6 per cent to $218.97.

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Luxury stocks were another casualty of worries of slowing China demand, sparked by LVMH's results.

Although that's largely because the USA economy is so strong, the spike in rates for the benchmark United States 10-Year Treasury has investors wondering if the near-decade-old bull market may finally be ending. But eventually the high rates worry stock investors, as higher rates tend to increase borrowing costs and cut into profit margins.

Tech is taking its lumps because bond yields have climbed in recent weeks, hovering at a more-than-seven-year high.

THE Australian share market has plunged by more than 2 per cent in early trading following a bloodbath on Wall Street overnight.

"You had stocks doing really well, rates for the most part were very well-behaved".

The rise in US Treasury yields has been bolstered by good US economic data that has reinforced expectations of multiple rate hikes over the next 12 months by the Federal Reserve. "Semiconductors have the most exposure to China out of segments in the S&P 500".

Sears Holdings plunged 37 percent after the Wall Street Journal reported that the struggling retailer is preparing a bankruptcy filing.

Trade-sensitive industrial stocks also fell as tensions between Washington and Beijing persisted. Over the years, Sears has closed hundreds of stores and sold several famous brands.

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