Published: Fri, October 12, 2018
Markets | By Jeffery Armstrong

The Dow tumbles more than 400 points

The Dow tumbles more than 400 points

Bond yields and therefore interest rates have been rising for more than two years as the USA economy grew strong. That will raise the cost of corporate borrowing and could drag on economic growth.

A surge in Treasury yields appears to be fueling the losses, as the 10-year US Treasury yield spiked last month and has continued to climb throughout October, landing at 3.21 per cent. On Wednesday he said he thought policy makers were "making a mistake" and said the Fed had "gone crazy".

"The market is not necessarily going to take out much from the yield path", Goncalves said.

Sentiment also has been dampened by the spreading U.S.

"It is a flawless storm for technology right now with the tariff war with China and weaker demand for chips", Nauman said. The International Monetary Fund cut its outlook for global growth this week, citing interest rates and trade tensions. Delta Air Lines shares rose 3.8 percent after the airline beat profit expectations.

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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. But they are also possibly leading indicators of the end of a historic bull market, in which stock-market indexes continue upward quarter after quarter.

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.

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

In the 1973-74 stock market crash, for instance, the S&P 500 peaked around 700 in December 1972, and then dropped a percentage point or two nearly every month through October 1973, a 15% decline overall. The Nasdaq Composite closed at 7,422.05 for a loss of -315.97 points or -4.08%. The Russell 2000 index of smaller-company stocks shed 2.9 percent, to 1,575.41. "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".

Some technology companies emerged relatively unscathed, with Facebook and Activision Blizzard advancing and Microsoft and Google parent Alphabet falling only modestly. Tencent has retreated 43 percent from its high this year and fallen out of the top 10 global companies by market value.

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Jeremy Klein, chief market strategist at FBN Securities, said: "Portfolio managers tend to move to the sidelines in a skittish tape out of fear of suffering from a quick and sharp pullback".

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The dollar slipped to 112.17 Japanese yen from 112.27 yen late Wednesday. The euro rose to $1.1525 from $1.1496.

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 USA sanctions loom.

"There is more optimism that they will find some agreement between Britain and the European Union before Brexit", said Steve Englander, global head of G10 FX research at Standard Chartered Bank in NY.

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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.

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