Published: Fri, October 12, 2018
Money | By Wilma Wheeler

Wall Street dives, setting the ASX up for heavy losses at open

Wall Street dives, setting the ASX up for heavy losses at open

USA stocks dropped sharply Wednesday, as a selloff in technology stocks led the major indices to lows not seen since this spring.

The benchmark index, the S&P 500, experienced its sixth straight day of losses, falling 2.1pc to 2,728. "That suggests the Fed will keep raising rates, and that's taking the wind out of the stocks that have done the most, particularly in the tech sector". A hallmark of the past decade has been ultra-low interest rates, which the Federal Reserve used to promote growth in the aftermath of the 2008 financial crisis.

"If investors are going to take profits then it will be from some of the bigger, high-growth names", Nauman said.

The selling Thursday was widespread.

Along with tech stocks, the FAANGs " Facebook, Amazon, Apple, Netflix and Alphabet" have led the market rally.

The drop led a wider drop in United States markets.

A surge in bond yields came to an end as investors who sought safety bought government bonds. But investors found more things to worry about.

At the same time, the burgeoning trade war between the United States and China has been creating uncertainty on corporate earnings. Strong earnings reports in the upcoming weeks could soothe investor nerves, but any negative comments from company executives about future profits could have the opposite effect. Recently a larger-than-normal number of companies have warned that their third-quarter results could be weaker than analysts expected.

The S&P 500 index fell 4 points, or 0.1 percent, to 2,781. The index has declined 6.7 percent during its current losing streak.

Bear markets since 1975 have had far lower percentage drops at their bottom, even as markets have grown remarkably in inflation-adjusted dollars.

The Dow Jones industrial average had its second-biggest drop of the year, plunging almost 500 points, or 1.9 percent, shortly after 2:00 p.m.

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. All 30 of the Dow's stocks were in the red and it fell below 26,000 total points for the first time in a month, CNN reported.

USA stocks are tumbling for the second consecutive day as the market's recent downturn gets worse. Industrial and internet companies also fell hard.

"Volumes are surging because people are sitting up and acting", he said.

The S&P 500's current decline is the longest since a nine-day skid shortly before the 2016 presidential election. It has climbed 27.5 percent since Donald Trump was elected, and is still up 2.1 percent in 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. "I don't think so", he said. In 1956, the Fed raised interest rates, while worldwide events like the Suez Crisis and the Hungarian Revolution caused investors to pull back. On Wednesday he said he thought policy makers were "making a mistake" and said the Fed had "gone crazy".

The consumer price index rose 0.1% in September, according to the Labor Department, compared with forcasts of a 0.2% increase.

The yield on the 10-year Treasury note fell to 3.13 percent from 3.22 percent late Wednesday. The yield on the 10-year Treasury fell to 3.16 percent.

Intel fell 2.6 percent and Nvidia 4.4 percent. Both indexes have fallen more than 5 percent the past two days. Microsoft and Alphabet, Google's parent company, held up better than the rest of the market.

It will take more than a daily stock market correction to stop the Fed from hiking, said George Goncalves, managing director and head of fixed income strategy at Nomura in NY. As of October 10, it's lasted 3,503 days.

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

Oil prices fell to two-week lows after OPEC said its production rose in September, easing concerns about a drop-off in Iranian barrels as United States sanctions loom. Wholesale gasoline, heating oil and natural gas also declined.

Bank shares were boosted as yields rose, with Citigroup and Bank of America seeing gains of 0.4 percent and 0.3 percent, respectively.

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