Dow industrials sink 831 points as tech stocks plunge

Gladys Abbott
October 11, 2018

USA stock indexes fell in early trading Wednesday as interest rates nudged higher yet.

Trump often points to a strong economy and rising stock market as proof his tax and fiscal policies are working. Investors see many of these countries as being vulnerable to higher US interest rates, which can pull away investment dollars.

After Trump's election, tens of billions of dollars in new money flooded into mutual funds, a trend that no doubt has contributed to the current bull market's unusual longevity.

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.

Earlier on Thursday, the SPI200 futures contract was down 109 points, or 1.81 per cent, to 5,914.0 at 7am AEDT, pointing to bleak open for the ASX, which had clawed back some ground on Wednesday after a turnaround in financial stocks and a strong performance by the healthcare sector.

The Nasdaq composite, which has a high concentration of technology companies, had its biggest loss in more than two years.

The Dow Jones Industrial Average fell 706.25 points, or 2.67 per cent, to 25,724.32, the S&P 500 lost 85.47 points, or 2.97 per cent, to 2,794.87, and the Nasdaq dropped 260.3556 points, or 3.36 per cent, to 7,477.6601.

This afternoon saw shares in Intel and Microsoft drop by more than 2.5 percent, while Amazon shares fell by more than 2 percent and Netflix saw a decline of 3.6 percent. But eventually the higher rates worry stock investors, as they tend to increase borrowing costs and cut into profit margins. The two-year yield rose to 2.89 percent from 2.87 percent, and the 30-year yield climbed to 3.39 percent from 3.37 percent.

The Dow's point decline was the worst since February, when the index fell by more than 1,000 - twice.

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Traders were set for losses in Asian stocks after a rout in United States equities that deepened late in the day amid investor concern that rising interest rates and trade tensions could hurt company profits. The Fed has predicted that unemployment will remain below 4 per cent through 2020 and inflation is expected to track around 2 per cent, conditions that Federal Reserve chief Jerome Powell called "remarkably positive". The energy sector was close behind with a 2.9 percent loss, as oil extraction in the Gulf of Mexico shutting down due to the hurricane. The stock fell 15 per cent to 50 cents.

SEARED: Sears Holdings nosedived after the Wall Street Journal reported that the struggling retailer hired an advisory firm to prepare a bankruptcy filing that could come within days. It was more than $40 five years ago.

US stocks plunged Wednesday as investors ramped up their selling of high-flying technology and internet stocks.

Sears has closed hundreds of stores and sold several famous brands or put them on the block as it sees more customers abandon its stores.

When investors expect rates to rise, the prices of bonds paying lower interest rates falls. Brent crude, the global standard, lost 65 cents to $84.35. Heating oil fell 1.2 per cent to $2.39 a gallon.

Stocks from emerging markets were also hard hit.

It followed a bleak session in Europe, where Germany's Dax and France's Cac 40 had each ended the day more than 2% lower.

Japan's Nikkei 225 added 0.2 per cent, South Korea's Kospi dropped 1.1 per cent and the Hang Seng in Hong Kong gained 0.1 per cent. Investors see many of these countries as being vulnerable to higher USA interest rates, which can pull away investment dollars.

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