Wall Street rebounds after rout, Nasdaq +3.0%

Alicia Cross
October 27, 2018

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For the S&P 500, a 10 percent decline could push the USA index into correction territory. But, the Philadelphia Semiconductor index rose 1.97 percent, helped by Xilinx's 15.2 per cent jump on its strong quarterly report. The Commerce Department said orders to USA factories for major manufactured goods grew in September, and the increase was larger than analysts expected.

In Europe, European Central Bank President Mario Draghi said the region's economy is still growing at a solid clip even though there are signs it has weakened somewhat recently.

Stocks are falling sharply on Wall Street again, erasing most of their big gains from the day before. After Thursday's gains, the Dow and S&P 500 are each up about 1 per cent for the year. The Dow Jones Industrial Average lost more 2.4 percent, losing more than 600 points to end at 24,583.42.

And while earnings growth for S&P 500 companies is expected to be around 22 percent, according to S&P Global Market Intelligence, some companies are painting a less-than-rosy outlook. The index is now down for the year.

That reignited worries over the impact of rising borrowing costs, wages and tariffs on corporate profits and caused S&P industrial stocks to slide 2.24 percent.

The Nasdaq registered its biggest weekly drop since March 23 after confirming a correction earlier in the week. Both could impair profit growth for US companies. The Nasdaq surged 209.93 points, or 3 per cent, to 7318.34 after its biggest drop in seven years.

"We are seeing what we call a bottom fishing today", said Howard Silverblatt, senior analyst at S&P Dow Jones Indices.

Warne, of Edward Jones, said investors have been dumping shares of companies that reported weak results, while companies that surpassed expectations haven't been rewarded much. She expects that to change when the dust settles.

"Expectations for USA company earnings are quite high, so whenever they are not being met, the reactions are quite severe", said Miraji Othman, credit strategist at BayernLB, as quoted by Reuters.

Following the heavy falls on global markets, ASX futures slumped by nearly 100 points, indicating falls of more than 2% on the local index today.

Technology and consumer-focused companied led the declines early Friday. If the Nasdaq closes down 10 percent or more from its closing high, a level it hit in the session, it would confirm a correction.

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Two other giant US companies, Amazon and Alphabet, will report their third-quarter results after the close of trading.

Amazon, the second-most valuable USA stock, fell after reporting its financial results.

Other issues that have pressured stocks include worries about rising United States interest rates and uncertainty over the fallout from the murder of Saudi Arabian journalist Jamal Khashoggi.

The index's tech giants felt the plunge: Facebook lost 5.4 percent, Amazon, 6 percent, Apple, 3.4 percent, and Netflix was down 9.4 percent.

The Australian dollar has fallen further to 70.6 USA cents.

Some investors, including David Meier, a portfolio manager at Motley Fool Asset Management, say the sense that stock prices have simply reached their peak is driving the markets, too.

Communications stocks were among the biggest gainers. The British FTSE 100 rose 0.6 percent, although WPP, the world's largest advertising company, said its business slowed in the third quarter and warned about weaker annual earnings.

Hong Kong's Hang Seng index sank 3.1 percent.

The Kospi in South Korea dropped 1.6 per cent. Japanese telecoms and energy giant Softbank lost 4.4 percent. That contrasts with the momentum of the USA economy. The yield on the 10-year Treasury note fell to 3.08 per cent from 3.13 per cent late Thursday. Australia's S&P-ASX 200 dipped 1.1 percent. Silver dropped 0.8 percent to $14.68 an ounce.

Gold rose 0.3 percent to $1,235.80 an ounce. Brent crude, the benchmark for worldwide oil prices, dipped 53 cents to $76.37.

The dollar fell to 111.54 yen from 112.61 yen on Thursday.

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