Dow Plummets More Than 800 Points

DOW

Probably the third worst decline in the history in terms of points, when Dow plunged nearly 832 points on Wednesday, as at Oct 10, 2018. Sending the index below 26,000 points for the first time in a month, while all 30 stocks were in red, the index fell by more than 3%. While S&P 500 dropped nearly 3% posting its fifth straight decline. Since June 2016, in the worst percentage decline the Nasdaq dropped more than 4%.

The Nikkei was down more than 3%, following the downtrend in the international markets, in morning trading as at Oct 11, 2018. Sliding sharply because investors are worried about rising interest rates, stocks are in the center of an October slump. A nerve-racking month for investors, October has often been living up to this reputation. All three indexes are down where Nasdaq has plunged nearly 8% already in October. When the index was down by more than 1,000 twice Dow’s point decline was the worst since February 2018. Although it does not beat the top declines the index fell 23% in 1914 and on Black Monday in 1987. [optin-monster-shortcode id=”wxhmli4jjedneglg1trq”]

The Technology Select Sector SPDR Fund plunged 4.85% which is a proxy for the technology, has not happened since Aug 2011. Let’s see why?

Bond yields have climbed in recent weeks, soaring at a more-than-seven-year high, which is why the tech stocks are taking a hit. As the Federal Reserve seems intent on raising short-term rates for the probable future, higher long-term rates could slow down red-hot sectors of the economy, including technology. Affecting corporate profits, higher rates increase borrowing costs.

Companies that aren’t as expensive and also pay healthy, stable dividends, investors may want to shift out of momentum and enter into more defensive stocks. Especially as trade tension with the United States has escalated, continued worries about a slowdown in China’s economy, were also dragging down the broader market.

The likes of Facebook (NASDAQ: FB), Amazon (NASDAQ: AMZN) and Netflix (NASDAQ: NFLX) tech leaders all helped lead the market lower, while food companies Smucker (NASDAQ: SJM), gold miner Newmont (NASDAQ: NEM), General Mills (NASDAQ: GIS), and bargain retailers Dollar General (NASDAQ: DG), and Dollar Tree (NASDAQ: DLTR) finished the day higher among the food companies.

With earnings due from big banks on Friday, to take the lead from tech stocks, investors will look for new market sectors. If the Fed keeps raising interest rates and bond yields climb higher, banks should do better, since it will make their loans more profitable, but this is only in theory and reality may differ. Out of 505, only 17 stocks in the S&P 500 wound up with a gain, even utility stocks, fell slightly Wednesday, which tend to pay big dividends. CBOE Volatility Index, or VIX often called Wall Street’s gauge for fear, surged nearly 40%.

This market lag will wind up being a healthy dip as long as earnings and the US economy are continuing to grow as this slide was long overdue.

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