Economy

Stock prices plummet amid tech selloff, rising interest rates

Stock prices plummet amid tech selloff, rising interest rates”

Wall Street stocks plunged Wednesday, with major indices losing more than three percent in a selloff prompted by the sudden jump in USA interest rates.

Technology stocks, some of the biggest winners over the past 12 months, fell much more than the rest of the market Wednesday. Apple and Amazon both had their worst day in two and a half years. The Nasdaq composite, which has a high concentration of technology stocks, tumbled 244 points, or 3.2 percent, to 7,495.

Major economic reports have pointed to unemployment at a 50-year low and tax cuts beginning to take effect. The Russell 2000 index of smaller-company stocks lost 25 points, or 1.6 per cent, to 1596. That hasn't happened since right before the 2016 presidential election. The tech-heavy Nasdaq Composite was down by 2.4 percent.

The Dow Jones Industrial Average gave up 500 points, or 1.9 per cent to 25,926.

The S&P 500 index fell 15 points, or 0.6 percent, to 2,864. It's fallen 6.3 per cent over the last five days. Microsoft gave up 3.3 percent. Technology stocks fell especially sharply. Apple, Boeing, Nike and Visa all tumbled more than 4 per cent, while Caterpillar and 3M lost nearly 4 per cent.

Insurance companies dropped as Hurricane Michael continued to gather strength and came ashore in Florida bringing winds of up to 155 miles an hour. Companies that sell non-essentials to consumers dropped 1.6 percent.

Luxury stocks were another casualty of worries of slowing China demand, sparked by LVMH's results.

Stock prices have been hurt by rising interest rates, which have boosted Treasury yields over the last week. The two-year yield rose to 2.89 percent from 2.87 percent, and the 30-year yield climbed to 3.39 percent from 3.37 percent.

Bond prices fell. The yield on the 10-year Treasury rose to 3.23 per cent.

"It's a risk-off environment as investors are focusing on spiking yields and taking profits off the table as they are concerned about whether the bull market is actually coming to an end", said Ryan Nauman, market strategist at Informa Financial Intelligence.

"Amazon recently announced they were increasing wages, Facebook is spending a ton on security", she said.

Sears Holdings plunged 32 percent after the Wall Street Journal said the debt-laden retailer was preparing for a possible bankruptcy.

Sears has closed hundreds of stores and sold several famous brands or put them on the block as it sees more customers abandon its stores.

USA crude settled down $1.79 at $73.17 per barrel and Brent fell $1.91 to settle at $83.09. Brent crude, the global standard, lost 2.2 per cent to US$83.09 a barrel in London. The current benchmark interest rate is 2 to 2.25 percent. Stocks continue to retreat on Wednesday, with 10 of the 11 sectors in the red and bond yields continuing to march higher.

Gold rose 0.2 percent to $1,193.40 an ounce.

There were, however, slight lifts for Japan's Nikkei, which added 0.2 per cent, and Hong Kong's Hang Seng, which gained 0.2 per cent.

The CAC 40 in France dropped 2.1 percent, Germany's DAX lost 2.2 percent and the FTSE 100 in London fell 1.3 percent. And tech stocks got hit particularly hard.

When investors expect rates to rise, the prices of bonds paying lower interest rates falls.



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