Published: Thu, October 11, 2018
Money | By Ralph Mccoy

Dow plunges more than 800 points as tech stocks take beating

Dow plunges more than 800 points as tech stocks take beating

U.S. stocks plunged to their worst loss in eight months on Wednesday as technology companies continued to drop.

Stock prices have been hurt by rising interest rates, which have boosted Treasury yields over the last week.

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

"A sustained rise in rates is probably reflective of improving economic conditions, so that in and of itself isn't necessarily a bad thing for stocks", said Willie Delwiche, investment strategist at Baird in Milwaukee.

The S&P 500 index sank 73 points, or 2.5 per cent, to 2,807 as of 3:30 p.m. That hasn't happened since right before the 2016 presidential election. The Nasdaq composite dropped 173, or 2.2 percent, to 7,565.

The Dow Jones industrial average gave up 738 points, or 2.8 per cent, to 25,686.

Wall Street stocks plunged Wednesday, with major indices losing more than three percent in a selloff prompted by the sudden jump in USA interest rates.

For example, a yield rise in a month of one standard deviation or less, which would be 20 basis points now, is manageable for stocks, Goldman said in a note last week.

The Dow Jones Industrial Average experienced the third worst point decline in its history Wednesday, falling more than 800 points.

Alibaba dropped 4.1 percent after Morgan Stanley and Raymond James cut their near-term profit estimates on the Chinese e-commerce company, citing a softer economic environment in China.

Amazon has soared 50 percent this year, but has fallen 14 percent from its all-time high in early September.

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The stock market as a whole, however, had solid reasons behind the fall: rising interest rates.

Insurance companies dropped as Hurricane Michael continued to gather strength and came ashore in Florida bringing winds of up to 155 miles per hour. Berkshire Hathaway dipped 4.7 per cent to US$213.10 and reinsurer Everest Re slid 5.1 per cent to US$217.73.

Luxury stocks were another casualty of worries of slowing China demand, sparked by LVMH's results.

The biggest driver for the market over the last week has been interest rates, which began spurting higher following several encouraging reports on the economy.

U.S. stocks notched solid gains in the third quarter as investors brushed aside worries about trade wars and focused on strong corporate earnings and solid USA economic data.

The 10-year Treasury yield remained at 3.20 percent, about where it was late Tuesday, after earlier touching 3.24 percent.

The move particularly affects high-growth tech companies which have been a source of huge returns in recent months.

Bets on market calm, measured by the number of contracts shorting futures for the CBOE Market Volatility Index compared to long contracts, are at a higher level than before the market correction, according to data from the U.S. Commodity Futures Trading Commission.

"Amazon recently announced they were increasing wages, Facebook is spending a ton on security", she said.

Earlier on Wednesday, Sears Holdings plunged on reports that the struggling retailer is preparing to file for bankruptcy. Stocks plunged in Taiwan and fell across Southeast Asia.

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.

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