Brutal Plunge On Wall St, Dow Wipes Out 2018 Gains
Nowhere to hide as Wall Street took a bath overnight in one of the worst days in its history. Our market is poised to follow. After its 95 slide on Monday, the futures market has another 131 points in losses pencilled in for the start of trading on the ASX at 10 am. It will be a bloody day for investors of all sizes.
US stocks free fell at times on Monday, as traders abandoned the Trump tax cuts boom story and trigged massive computer-driven sales drives that at one stage sent the Dow down almost 1,600 points for the largest intraday fall on record - larger than anything seem on Black Monday in 1987 in absolute terms (but not percentage) or the GFC (September 2008 when the Dow fell 777 points).
The Dow lost 1,175 points, or 4.6% (meaning it has lost more than 8.7% since the start of last week), in at times chaotic selling. It was the largest ever points fall in a single day.
The selling waves shattered the S&P 500 which shed 4.1% or more than 113 points (meaning it has lost 8% after last week’s 3.9%). And it was a similar story with the Nasdaq which lost 3.78% (meaning it is down around 7.5% in the past six sessions).
That puts Wall Street within another bad trading session of a 10% correction, which would be the first of the Donald Trump Presidency - something if it happens he will not be claiming credit for, unlike his succession of boasts about the surge in share prices since his election in November, 2016.
And yet the widely blamed trigger for the selling - rising bond yields in the US, Europe and Asia reversed overnight, such as was panic among investors for safe haven investments (in US Treasuries) and yields slumped to 2.73% for the US 10 year bond. That was a massive fall of 11.5 basis points
The tumble in bond yields didn’t protect equities which fell sharply in the final half hour.
After the huge 20% plus rally since Trump’s election in November 2016, last week’s shaking (including Friday’s 665 point rattling of the Dow) triggered a selling wave on Monday as investors took their big profits and headed for the sidelines.
And while there were buyers in the market, sellers outweighed and the computerised programs with selling trigger points around 25,000 points for the Dow (for example) send prices lower as they were breached. There was a back up of sell orders at times, meaning sellers had overwhelmed buyers.
The S&P 500 fell below 2,700 points, which was another trigger point, according to US traders, while the Nasdaq saw more selling as it tumbled through the 7,000 point range.
At its bottom, the Dow had shed 6%. It then rallied back under a 1,000 point loss, and then under 900 points, only to see another wave of selling in the final half hour. The story was the same for the S&P 500 and the Nasdaq where tech giants and minnows were hit hard.
Friday’s 665 point slide in the Dow means the index has now lost well over 2,280 points in six sessions and over 1,800 points in the last two - the biggest two day fall ever.. That is a massive and very rapid lost of value.
The sharp decline puts the Dow back in the red for the year. At 1,500 points, the intraday move erased all of its gains for 2018, pushing it negative, down 1% for the year after boasting a return of nearly 6% at the end of January.
The S&P 500 also gave up its gains for the year after dropping more than 4%.
Our market slid 95 points on Monday, but the overnight futures market details were unavailable from the ASX website early this morning because of “difficulties’ in displaying the data.
Oil prices fell as equities swooned. In fact oil futures prices mirrored to some extent the plunge in share prices. Continuing fears about rising US production past the 10 million barrels a day played a part as well.
March West Texas Intermediate crude futures fell $US1.30, or 2%, to settle at $US64.15 a barrel in New York - the lowest in a fortnight according to FactSet data. In London Brent futures fell 1.5% to $US67.55, trading at a one-month low. Both crudes fell last week as well.
Gold was trading higher in early Asian electronic dealings after dipping 80 US cents at the settlement on Monday on Comex in New York to $US1,336.50 an ounce. That was after last week’s 1.5% slide.
Comex March silver was also up in after hours trading but shed 3.8 cents, or 0.2%, to $US16.671 an ounce at its New York settlement.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.