The Dow tumbles more than 400 points

Anna Jefferson
October 12, 2018

The benchmark S&P 500 and the Dow Jones Industrial Average fell almost 1.5 percent and at the day's low had retreated 3.7 percent and 3.6 percent, respectively, from their all-time highs.

"The direct concern is higher interest rates", said Rick Meckler, partner, Cherry Lane Investments, a family investment office in New Vernon, New Jersey. More than a quarter of stocks on the Shanghai exchange fell by their 10 percent daily limit, according to Bloomberg, as the Shanghai Composite Index hit lows not seen since 2014. Energy companies fell with oil prices, and even safer bets like utilities and real estate companies sank.

Some technology companies emerged relatively unscathed, with Facebook and Activision Blizzard advancing and Microsoft and Google parent Alphabet falling only modestly.

A surge in bond yields came to an end as investors who sought safety bought government bonds.

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. On Wednesday he said he thought policy makers were "making a mistake" and said the Fed had "gone crazy". The Nasdaq dropped more than 4% in the worst percentage decline since June 2016.

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In other metals trading, silver rose 2 percent to $14.61 an ounce and copper added 0.8 percent to $2.80 a pound. Higher rates can slow economic growth, erode corporate profits and make investors less willing to pay high prices for stocks. Nvidia wasn't spared either as the GPU-manufacturer out of Santa Clara, CA saw a drop of seven-and-a-half percent itself which brings its year-to-date market gain to 33 percent.

That all played into a market that is increasingly anxious about global growth after warnings from the International Monetary Fund this week and a rise in Treasury yields to a more than 7-year high above 3 percent that signals a tightening of available capital globally.

Wall Street stocks has plunged with major indices losing more than three percent in a sell-off prompted by the sudden jump in U.S. interest rates.

Stocks fell Thursday morning after Wall Street's worst day in eight months.

Technology and retail companies continued to stumble. It pushed the two-day loss to almost 1,400 points.

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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. After years of big gains, those stocks are now out of favor.

"People fear that it will be harder to snap back if we're seeing a cyclical top in earnings with those two headwinds, which are not going away", said Michael O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

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. Heating oil shed 2.6 percent to $2.33 a gallon.

The Producer Price Index increased 0.2% in September and reported a 2.6% annual increase.

The Japanese yen strengthened 0.01 per cent versus the greenback at 112.29.

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