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

Dow sinks 800 as tech companies decline

Dow sinks 800 as tech companies decline

The sell-off started in the USA on Wednesday, with the Dow Jones seeing a more than 800 point drop during the session, its third biggest single-day point fall in history.

But it was the rout across the Atlantic (Shanghai: 600558.SS - news) that proved even more eye-catching with the rise in US Treasury bond yields to seven-year highs seen as a key factor.

The White House says there is no reason for concern after USA stocks suffered their worst loss in eight months Wednesday. Among the so-called FAANG stocks, Facebook Inc. fell 1.3 per cent, Inc. fell 3.6 per cent, Apple Inc. fell 2 per cent, Netflix Inc. The Nasdaq composite fell 73 points, or 1 per cent, to 7,663.

"Clearly stocks are spooked by higher rates and maybe some inflation that seems to be creeping in", said Michael Farr, CEO of Farr, Miller & Washington.

The Philadelphia Semiconductor index sank 2.64 percent, with Intel down 2.0 percent and Nvidia 4.7 percent.

The Standard & Poor's 500 index fell 94 points, or 3.3%, to 2,785 on Wednesday, its biggest one-day loss since February 8.

The turbulence follows a recent winning streak for US economic readings, including a 50-year low for the unemployment rate and the best-ever gauge of service-sector activity.

Elsewhere, shares of Sears plummeted more than 37% after reports the cash-strapped retailer could file for bankruptcy protection as soon as this week. The price of the bond with the lower interest rate, known as its coupon, will fall enough to raise the yield to mirror the higher rate.

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The small-cap Russell 2000 index, less sensitive than its larger peers to global worries such as trade and yields, was down 1 per cent at 1,605.60 points, below its 200-day moving average.

The yield on USA 10-year Treasuries has been at a seven-year high and closed at 3.17 per cent.

The S&P 500 lost 94 points, or 3.3 percent, to 2,785. Think of it this way, if the Treasury issues a $1000 bond paying 3 percent interest, investors will not pay $1000 for an older bond paying 2 percent interest.

Japan's Nikkei 225 added 0.2 percent, South Korea's Kospi dropped 1.1 percent and the Hang Seng in Hong Kong gained 0.1 percent. Brent crude, the worldwide standard, lost 2.2 per cent to US$83.09 a barrel in London.

Trade-sensitive industrial stocks also fell as tensions between Washington and Beijing persisted. The two-year yield rose to 2.88 percent from 2.87 percent, and the 30-year yield climbed to 3.38 percent from 3.37 percent. Heating oil fell 1.2 per cent to $2.39 a gallon.

USA gold futures settled up $1.9, or 0.16 percent, at $1,193.4. The Japanese yen strengthened 0.53 percent versus the greenback at 112.36. Copper fell 0.9 percent to $2.78 a pound.

The S&P 500 fell 39 points, or 1.4 percent, to 2,840.

The euro and sterling rose, underpinned by optimism for a Brexit deal, while the USA dollar lost ground against a basket of currencies even as US yields hovered near multiyear peaks.

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