Dow industrials sink 831 points as tech stocks plunge

Alicia Cross
October 12, 2018

Apple sank 4.6 percent, Microsoft dropped 5.4 percent, and Google's parent company lost 4.6 percent.

"It's a momentum correction, not a portfolio correction", Joe Terranova, chief market strategist at Virtus Investment Partners, told CNBC.

Stocks retreated Wednesday, with the Dow Jones industrial average losing more than 800 points in a selloff that accelerated in the final minutes of trading.

Investors were concerned that the Federal Reserve will continue to raise interest rates and that this will slow economic growth and make borrowing more expensive for the USA government, as well as businesses and consumers. The move particularly affects high-growth tech companies which have been a source of huge returns in recent months.

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. Concerns about consumer spending have also led to jitters about United States companies as they prepare to unveil results for the third quarter of the year over the coming weeks. But at its session low the benchmark fell 2.7 percent to its lowest level since early July.

But Hogan said earnings were also a source of worry because they could showcase the consequences of Trump's trade wars for USA companies, from raising costs of raw materials to forcing enterprises to change supply chains. Investors see many of these countries as being vulnerable to higher US interest rates, which can pull away investment dollars.

Meanwhile struggling retailer Sears was in focus as the Wall Street Journal reported that it was preparing to file for bankruptcy. It was at just 3.05% early last week and 2.82% in late August. Amazon dropped another 2 percent to $1,719.36 and Apple fell 0.9 percent to $214.45. Higher rates increase borrowing costs, pinching corporate profits. Amazon skidded 4.8 percent to $1,781.21.

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The Treasury held the following auctions: three-year note at 2.989%, 10-year note at 3.225%. Over the years, Sears has closed hundreds of stores and sold several famous brands.

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. Brent crude, the worldwide standard, dropped 3.4 percent to $80.26 a barrel in London.

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

The communication services sector also rose 0.49 percent on Thursday, with Facebook and Alphabet both rising 1.4 percent. Copper fell 0.9 per cent to $2.78 a pound.

US 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. That's its steepest downturn since a 10-percent drop in early February.

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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