Published: Fri, October 12, 2018
Money | By Armando Alvarado

Dow drops 545 points as stock market slide continues

Dow drops 545 points as stock market slide continues

Steep falls in US shares on Wednesday rolled into Asia and Europe on Thursday.

Oil prices fell more than 2 percent as U.S. stocks plunged, even though energy traders anxious about shrinking supply from Iran due to U.S. sanctions and kept an eye on Hurricane Michael, which closed almost 40 percent of U.S. Gulf of Mexico output. Both indexes have fallen more than 5 percent the past two days.

The S&P 500 posted its fifth straight decline, plummeting almost 3.3%.

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. Higher rates can slow economic growth, erode corporate profits and make investors less willing to pay high prices for stocks.

The selling Thursday was widespread.

"As stocks go up, tech goes up more than the stock market".

So bond yields, the return an investor realizes by owning a bond, move in the opposite direction of prices. But investors found more things to worry about.

At the same time, the burgeoning trade war between the USA and China has been creating uncertainty on corporate earnings. Strong earnings reports in the coming weeks could soothe investor nerves, but negative comments from company executives about future profits could have the opposite effect.

The S&P 500 was down 3.29 percent, and the technology-heavy NASDAQ took the biggest hit, plunging more than four percent. Amazon skidded 6.2 percent to $1,755.25. It was at just 3.05 percent early last week and 2.82 percent in late August.

The Dow Jones Industrial Average lost 545.91 points, or 2.1 percent, to 25,052.83 after falling as much as 698.

The Nasdaq fell 92 points, or 1.3 percent, to 7,329.06. The Russell 2000 index of smaller-company stocks shed 37 points, or 2.3 per cent, to 1,584.

Thursday's losses in the US followed steep declines overseas. The stock fell 16.8 percent to 49 cents.

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As long as earnings and the USA economy are continuing to grow, this market pullback will wind up being a healthy dip Alexander said. That hasn't happened since right before the 2016 presidential election. It has climbed 27.5 percent since Donald Trump was elected, and is still up 2.1 percent in 2018.

US shares are set for big declines when markets open Thursday.

Delwiche, the Baird strategist, thinks the current slump isn't over yet.

The previous bear market, from October 2002 to October 2007, collapsed in the face of the global financial crisis, precipitated by raising interest rates in the face of inflation that revealed the vast scale of subprime mortgages and other badly collateralized loans. On Wednesday he said he thought policy makers were "making a mistake" and said the Fed had "gone crazy". He continued to attack Fed Chair Jerome Powell Thursday, saying he was "disappointed" in "far too stringent" rate hike decisions.

Rising interest rates make bonds more attractive relative to riskier stocks.

Treasury yields retreated from multi-year highs following the inflation data and as investors flocked to the relative safety of U.S. government bonds.

The 10-year Treasury yield rose to 3.22 percent from 3.20 percent late Tuesday after earlier touching 3.24 percent.

The dollar index fell 0.17 percent, with the euro up 0.25 percent to $1.1518. Microsoft and Alphabet, Google's parent company, were little changed. Facebook, the sixth-largest company, has tumbled 29 percent since late July, surpassing the 20-percent threshold for a "bear market".

At 11:22 a.m. ET, the Toronto Stock Exchange's S&P/TSX composite index was down 123.08 points, or 0.79 per cent, at 15,392.22.

US markets are coming off their steepest losses in eight months. Wholesale gasoline, heating oil and natural gas also declined.

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.

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