Dow falls 832 points in third-worst day by points ever

Gladys Abbott
October 12, 2018

The 10-year Treasury yield rose to 3.22 percent from 3.20 percent late Tuesday after earlier touching 3.24 percent. Those rates have been climbing after several encouraging reports on the economy.

"It's a momentum correction, not a portfolio correction", Joe Terranova, chief market strategist at Virtus Investment Partners, told CNBC.

Fears over the global trade war, rising rate hikes, the impact of Hurricane Michael, the upcoming USA midterm elections and a potentially disappointing Q3 earnings season likely all played a role in the weak market.

The S&P 500 lost 24.93 points, or 0.89 per cent, to 2,760.75 and the Nasdaq Composite dropped 30.71 points, or 0.41 per cent, to 7,391.34.

"If investors are going to take profits then it will be from some of the bigger, high-growth names", Nauman said. The pan-European FTSEurofirst 300 index of leading regional shares closed down 1.57 percent. Amazon skidded 6.2 percent to $1,755.25.

The pullback - particularly for tech stocks - is needed, argued Joe Heider, president of Cirrus Wealth Management. It has climbed 27.5 percent since Donald Trump was elected, and is still up 2.1 percent in 2018.

"I don't see evidence right now that this is a one-off event", he said.

U.S. 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.

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The previous bear market, from October 2002 to October 2007, collapsed in the face of the global financial crisis, precipitated by raising interest rates in the face of inflation that revealed the vast scale of subprime mortgages and other badly collateralized loans.

The increase in yields from these bonds - which are parcels of U.S. government debt - can hurt stocks since they will provide competition for investors' cash.

The Mortgage Bankers Association's mortgage applications index was down -1.7%.

Technology and retail companies continued to stumble.

Shares in Facebook and Apple also fell more than 1 percent each. Those stocks have made huge gains for years, but they're now out of favor.

The CBOE Volatility Index, Wall Street's "fear gauge", rose 3.18 points to its highest since June 25.

Gold rose 0.2 per cent to $1,193.40 an ounce.

"People fear building prices into the system, both from China trade problems, other tariffs the USA has put into place, wage pressure, and today there is a little bit of concern about what the Hurricane in Florida could do to energy prices". The Japanese yen strengthened 0.53 percent versus the greenback at 112.36.

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