Published: Fri, October 12, 2018
Business | By Eloise Houston

US stocks open with modest losses

US stocks open with modest losses

The Dow Jones industrials fell 545 points, or 2.1 percent, to 25,052.83 and the benchmark S&P 500 dropped 57 points, or 2.1 percent, to 2,728.37.

USA government bonds resumed a selloff after rising to multi-year highs last week, with the 2-year yield rising to 2.906%, its highest level since June 2008. That was its biggest loss since March 22. "Since the market bottomed in March 2009, it's been more than 10 years of growth stocks leading the way non-stop". That decline came after the Dow's largest single-day drop in history, when it fell 1,175 points earlier that month.

The Dow fell 831 points, or 3.1 per cent, to 25,598.

The global market sell-off continued overnight, with Wall Street falling sharply amid a volatile trading session.

Microsoft dropped 4 per cent to $107.82. Industrial and internet companies also fell hard. Apple slipped by 4.6 percent while Amazon lost 6.2 percent.

Insurance companies dropped as Hurricane Michael continued to gather strength and came ashore in Florida bringing winds of up to 155 miles per hour. 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. Tiffany plunged 9.5 percent to $111.28 and Ralph Lauren fell 7.3 percent to $118.42.

The market had been calm from late June through September as investors were satisfied with continued economic growth, strong company profits, and signs of progress in trade talks between the US and several partners, although the USA remained at odds with China.

U.S. stocks notched solid gains in the third quarter as investors brushed aside worries about trade wars and focused on strong corporate earnings and solid USA economic data.

But a recent International Monetary Fund warning on global growth taking a hit from trade disputes has hit confidence in the stock market, as has US Treasury yields at more than 7-year highs, signalling a tightening of capital globally. That's its steepest downturn since a 10-percent drop in early February.

All of those factors could threaten the impressive profits Corporate America has been reporting this year.

"The market is not necessarily going to take out much from the yield path", Goncalves said. Only 17 stocks in the S&P 500 wound up with a gain.

Meanwhile struggling retailer Sears was in focus as the Wall Street Journal reported that it was preparing to file for bankruptcy.

West Texas Intermediate has shed almost $4 a barrel since Tuesday, marking its steepest two-day decline in more than three years. 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.

"People fear building prices into the system, both from China trade problems, other tariffs the USA has put into place, wage pressure, and today there is a little bit of concern about what the Hurricane in Florida could do to energy prices". Brent crude, the global standard, lost 2.2 percent to $83.09 a barrel in London.

The Philadelphia Semiconductor index sank 2.64 percent, with Intel down 2.0 percent and Nvidia 4.7 percent.

The communication services sector also rose 0.49 percent on Thursday, with Facebook and Alphabet both rising 1.4 percent.

In other metals trading, silver rose 2 percent and copper added 0.8 percent. It has climbed 27.5 percent since Donald Trump was elected, and is still up 2.1 percent in 2018.

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.

All 11 sectors in the S&P 500 were lower, with banks and energy stocks the hardest hit.

USA stocks experienced their worst two-day stretch in years this week, with the Dow dropping 1,200 points on Wednesday and Thursday.

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