The worst day for Wall Street since the big sell-off in February as the slide in tech giants accelerated, led by Amazon and Netflix.
The Dow fell 832 points, or 3.2%, at 25,598 and notched its ugliest day since February 8 this year. It was the tech sectors worst single day’s performance in more than seven years as tracked by the S&P 500 tech sector.
Tech stocks have dragged Wall Street higher for much of the past year to 18 months, especially those megatechs – Apple, Amazon, Alphabet, Facebook, Netflix, and Microsoft. They all took a pounding on Wednesday and Amazon shares are now in correction territory 9down 19% or more from its most recent peak).
If this sell-off develops in this market-leading sector of the market Wall street could see a nasty end to 2018.
Analysts blamed rising interest rates but US treasury yields retreated a little on Wednesday, so that wasn’t the trigger for the big selloff. The 10-year yield fell to 3.192% at the close – two days ago it was over 3.26% and at seven-year highs.
Some analysts wonder if US investors are starting to signal that the Republicans under president trump will suffer big losses at the mid-term elections early in November – perhaps enough to see the Democrats win at least the House of Representatives and turn the President into a two-year lame duck.
US rates have been rising all year (in fact the current high yields for Treasuries have only just topped the levels seen in February and March of this year).
The market has been expecting the Fed to lift rates this year with a 4th increase penciled in for December; the economy is strong, unemployment low and thanks to the corporate tax cuts from President Trump, hundreds of billions of dollars are sloshing around the economy.
The only negatives are rising oil and petrol prices, and what seems to be the emergence of a weakness in housing – especially in luxury apartments in New York and other major cities where big price falls have followed slumping sales. Corporate debt is a small worry, the situation Italy and Brexit are concerns in Europe and emerging markets like Turkey and Argentina are suffering from growing economic pressures.
Trump’s trade war with China is still rattling nerves and the Chinese government has reversed course and is now starting to ease policy to help arrest a slowdown in activity. All this is not ’new’ news. And yet it all came together on Wednesday to send Wall Street off in its worst day since February 8 and for seven years for the market-leading tech sector.
Oil futures fell despite a hurricane in the Gulf of Mexico – it cut production for a short while but caused little other damage to oil producing facilities and West Texas futures fell 2.8% to $US73.17 a barrel and Brent futures fell 2.67% to end at $US83.09.
Gold futures rose around $US5 an ounce to $US1,197 in after-hours trading after settling at $US1,193 an ounce on Comex in New York. Comex copper futures fell nearly 2% to US2752 a pound.
The S&P 500 index closed down 3.2% at 2,785, also its worst session in 8 months with much of the damage being done by tumbling prices of mega tech stocks. One of the main exchange-traded funds tracking the tech sector fell 4.5% on the day, its biggest fall in seven years.
The S&P 500 information technology was worst-performing sector, down 4.8%, the biggest one-day fall since August 2011. The consumer discretionary and energy sectors both fell around 3.6%p and all sectors of the Index ended in the red.
The S&P 500 has now fallen for five days in a row – its longest down streak of the Trump presidency.
And the Nasdaq Composite Index slumped 4.1% to end at 7,422 and registered its worst day since June 24, 2016. Wednesday’s fall accounted for most of the 7% slide in the Nasdaq in the past month.
Amazon shares have slumped sharply in the past month and in fact, are now in correction territory, down more than 11% after Wednesday’s 6.1% slump. Apple shares fell 4.6% and were one of the better performers. Netflix shares shed more than 8% in value, Microsoft lost 5.4%, Facebook, 4.1% and Alphabet 5%.
