Stock prices plummet amid tech selloff, rising interest rates

11 October, 2018, 14:38 | Author: Regina Silva
  • FAANG historical price chart

Technology stocks, the biggest winners in the market over the past year, took some of the worst losses.

Alec Young, managing director of global markets research at FTSE Russell, said investors fear that rising interest rates and growing expenses are going to erode the boost company profits have gotten from the GOP tax overhaul. While it's easy to paint a negative picture, Ward said the local market is still up for the year - at around 5 per cent.

"A insane day in the markets yesterday looks set to continue with further selling expected in equities today", Neil Wilson, chief analyst at Markets.com said in an email Thursday morning. That was its worst drop in eight months. The Nasdaq composite fell 152 points, or 2 per cent, to 7,585. Eastern time. It's on track for its fifth straight drop, which hasn't happened since right before the 2016 presidential election. The Nasdaq fell 315 points, or 4.1 percent, to 7,422.

At 2 p.m. ET, the Dow Jones Industrial Average, which hit fresh record highs as recently as last week, was down 424.58 points or 1.6 per cent, to 26,006.07. Stocks had come close to big drops in the last few days, but each time they recovered some of their losses.

A2 Milk Co dropped 6.7 per cent to $9.53, Pushpay Holdings sank 6.2 per cent to $3.50 and Synlait Milk fell 5.4 per cent to $9.15. Technology stocks fell especially sharply.

Shares in Facebook, Amazon, Apple, Netflix and Google's parent company Alphabet - the so-called "FAANG" stocks that have driven USA markets to all-time highs recently - all fell in NY trading.

Losses were fairly broad-based, with tech companies Amazon and Microsoft plummeting more than three percent, along with Boeing, Nike and Caterpillar. Berkshire Hathaway dipped 4.1 per cent to $214.64 and reinsurer Everest Re slid 4.6 per cent to $218.97.

Luxury retailers tumbled after LVMH, the parent of Louis Vuitton, said its sales growth in China slowed.

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The Aussie is buying 70.73 USA cents, up from 70.13 United States cents at Wednesday's close.

Higher interest rates "eroded the value of stocks, prompting institutional investors to place a massive amount of sell orders", an official at a bank-affiliated securities house said.

Stocks are extending their slump on Wall Street, led by drops in big technology companies, as rising bond yields draw investors out of stocks.

The yield on the 10-year Treasury is 3.20%, the highest level in seven years.

U.S. Treasury yields held near multi-year highs after producer prices climbed 0.2 percent in September, feeding into the pressure on the Federal Reserve to continue to raise interest rates even as the global economy struggles with headwinds from President Trump's trade war with China.

"As stocks go up, tech goes up more than the stock market".

"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.

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