Published: Fri, October 12, 2018
Money | By Arnold Ball

Dow sinks 800 as tech companies decline

Dow sinks 800 as tech companies decline

"The marked selloff in rates is the clear catalyst, though that reflects the slow-burning theme of the end of easy money".

The blue-chip index plunged more than 830 points - or 3.2 percent - at its close as traders fretted about raising interest rates and the sell-off of once-high-flying tech stocks. The Russell 2000 index of smaller-company stocks fell 30.03 points, or 1.9 percent, to 1,545.38.

Stocks from emerging markets were also hard hit. All this means that bonds, backed by the U.S. government, have become more attractive and thus many investors are turning to them as a risk-free investment.

On Thursday, President Trump renewed his criticism of the Federal Reserve, blaming the recent downturn in the stock market on the Fed's rate policy. "I think the Fed has gone insane", he charged.

It sets up the Australian sharemarket for steep losses to open the session, with futures at 7:35am AEDT pointing to a fall of 109 points, or 1.8 per cent, at the open. It has climbed 27.5 percent since Donald Trump was elected, and is still up 2.1 percent in 2018. Higher rates increase borrowing costs, pinching corporate profits.

The retreat on Wall Street was led by technology stocks, which dropped 2.33 percent, and the trade-sensitive industrial stocks that fell 2.22 percent.

Technology shares tumbled on fears of slowing demand, while bond yields ended lower after seeing multi-year highs earlier this week.

The yield on the 10-year Treasury is 3.20%, the highest level in seven years.

The drop in yields hurt banks, and JPMorgan Chase fell 3 percent to $1078.13 while Bank of America sank 3 percent to $28.36.

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Stocks are opening modestly lower on Wall Street following volatile trading in Asia and Europe.

Oil prices slumped to two-week lows as global stock markets fell, with investor sentiment made more bearish by an industry report showing US crude inventories rising more than expected.

Technology and retail companies continued to stumble.

The CAC 40 in France dropped 2.1 per cent, Germany's DAX lost 2.2 per cent and the FTSE 100 in London fell 1.3 per cent. Microsoft and Alphabet, Google's parent company, held up better than the rest of the market. Intel dipped 3.76 percent today but that might be viewed lightly when you look at team Red and team Green's day on the market.

The S&P 500 posted no new 52-week highs and 62 new lows; the Nasdaq Composite recorded 6 new highs and 291 new lows. Australia's S&P/ASX 200 slipped 2.4 percent to 5,906.00.

The rates rose Wednesday after the government released data showing the producer price index rose 0.2 percent in September and is up 2.8 percent on a year-over-year basis.

In other metals trading, silver rose 2 percent and copper added 0.8 percent.

The dollar fell to 112.59 Japanese yen from 113.05 yen late Tuesday.

"The #MAGA theme is unraveling a bit over the past few sessions as two-sided risks have been injected into the USA equity market", Mark McCormick, head of North American FX strategy at TD Securities, wrote in an email.

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