Wall Street extends sell-off, S&P breaches key level

Lloyd Doyle
October 11, 2018

A global measure of equity prices fell to a 1-year low on Thursday as Wall Street extended its October slide into a sixth session as investors feared an escalating USA trade war with China and risks from a recent climb in interest rates. Markets in Hong Kong, South Korea, Australia and Southeast Asia recorded similar declines.

At the closing bell in the New York Stock Exchange on Wednesday, the Dow Jones Industrial Average had lost 3.1 percent or 830 points to finish at 25,613.35, in the biggest fall in eight months.

United States stock indexes dived around 1 percent on Wednesday as worries over China and the impact of rising Treasury yields on global growth drove falls in luxury goods companies and chipmakers. Nasdaq composite, which has a high concentration of technology stocks, tumbled 244 points, or 3.2 per cent, to 7,495.

But historically, a monthly move of one to two deviations, or 20 to 40 basis points now, would result in flat S&P 500 returns.

Whether the lower reading will quell expectations the Federal Reserve will hike interest rates again in December remains to be seen, said Yousef Abbasi, global market strategist at INTL FCStone in NY.

Oil prices fell more than 2 percent as U.S. stocks plunged, even though energy traders anxious about shrinking supply from Iran due to U.S. sanctions and kept an eye on Hurricane Michael, which closed almost 40 percent of U.S. Gulf of Mexico output.

Wall Street shares have fallen sharply as investors sought safety amid growing worries about bond markets and trade tensions.

The S&P 500 was down 3.29 percent, and the technology-heavy NASDAQ took the biggest hit, plunging more than four percent.

The 10-year Treasury yield remained at 3.20 per cent, about where it was late on Tuesday, after earlier touching 3.24 per cent.


Intel fell 2.6 percent and Nvidia 4.4 percent. The stock fell 16.8 percent to 49 cents.

The stock market as a whole, however, had solid reasons behind the fall: rising interest rates.

Amazon ($AMZN) was the biggest loser in the sector, losing more than $56 billion in market cap on Wednesday alone.

"Short-term bonds are getting to be a compelling place to hang out", he said.

Globally, France's CAC 40 dropped 1 per cent and the DAX in Germany lost 0.6 per cent. Britain's FTSE 100 sank 1.3 per cent.

An ongoing conflict between Washington and Beijing weighed on large-cap industrial stocks, including Boeing (-2.5%) and Caterpillar (-1.6%).

The dollar slipped to 112.17 Japanese yen from 112.27 yen late Wednesday.

Mona Mahajan, US investment strategist at Allianz Global Investors, said: "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".

Shares in upscale jewellery retailer Tiffany & Co and perfume maker Estee Lauder both fell 7 percent after a warning from French luxury goods firm LVMH about softening demand in China.

Other reports by Iphone Fresh

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