US stocks plunge toward their worst loss in six months

Marco Green
October 11, 2018

The Dow Jones industrial average had its second-biggest drop of the year, plunging almost 500 points, or 1.9 percent, shortly after 2:00 p.m. The Dow Jones Industrial Average fell 700 points in afternoon trading.

The Toronto Stock Exchange closed down 336 points, or more than two per cent, on Wednesday, the fourth day in a row that the benchmark Canadian stock index was lower. In retail, Amazon sank 3.6 per cent to US$1803 and Nike gave up 4.4 per cent to US$76.87. The S&P 500 dropped 0.6%, and the technology-heavy Nasdaq Composite declined 1%.

The losses were widespread, and stocks that have been the biggest winners on the market the last few years, including technology companies and retailers, suffered steep declines.

That all played into a market that is increasingly anxious about global growth after warnings from the International Monetary Fund this week and a rise in Treasury yields to a more than 7-year high above 3 percent that signals a tightening of available capital globally. As the base rate from the Fed increases, the value of existing bonds with low-interest drops, which means when bought they will yield higher given a lower base price (price you paid to acquire them). The stock fell 15 per cent to 50 cents.

"As stocks go up, tech goes up more than the stock market". West Texas Intermediate crude oil, a USA benchmark, fell 2.1 per cent to US$73.36 a barrel - and the discounted price of Western Canadian Select oil widened to US$47 a barrel.

The Dow fell 831 points, or 3.1 percent, to 25,598.

Stocks fell Wednesday as concerns about global economic growth and ongoing trade tensions continued to hang over Wall Street and after the bond market resumed a sell-off that started last week. Brent crude, the global standard, lost 2.2 per cent to $83.09 a barrel in London.

"People fear building prices into the system, both from China trade problems, other tariffs the US has put into place, wage pressure, and today there is a little bit of concern about what the Hurricane in Florida could do to energy prices".

Gold rose 0.2 per cent to $1,193.40 an ounce.

The Nasdaq 100 Index plummeted more than four percent as Wall Street endured its sharpest one-day fall in months. Nvidia wasn't spared either as the GPU-manufacturer out of Santa Clara, CA saw a drop of seven-and-a-half percent itself which brings its year-to-date market gain to 33 percent.

Rising government bond yields have made them more attractive, leading investors to pull money out of equities.

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

As investors look for safe bets, utility stocks, which tend to pay big dividends, were also rising slightly Wednesday. Investors see many of these countries as being vulnerable to higher USA interest rates, which can pull away investment dollars. Brazil's Bovespa lost 2.5 percent and the Merval in Argentina sank 2.2 percent.

The dollar fell to 112.59 Japanese yen from 113.05 yen late Tuesday. The British pound rose to $1.3197 from $1.3146.

Other reports by Click Lancashire

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