Markets Right Now: Stocks fall sharply on Wall Street

Jeannie Matthews
October 25, 2018

The technology-heavy Nasdaq composite is now 12.3 per cent below its August peak. Bond prices rose, sending yields lower, as investors sought out safer investments.

"For most of the current decline, investors have been too quick to signal a bottom, but that appears to have changed today with panic-like selling in most of the heretofore strong groups and sectors", Bruce Bittles, chief investment strategist with Baird, said in a note. The benchmark index has lost 7.22 percent from its record closing high.

Despite signs of weakness in the housing market, the US economy appears to be very strong.

Companies including 3M, down more than 3%, and Caterpillar, down more than 7%, suggested in earnings reports that they would be passing along to consumers increased costs due to tariffs.

The losses pushed the two indices into negative territory for the year. "You're really starting to get more of a groundswell of caution".

While third quarter profit growth estimates have risen to 22.4 per cent from 21.6 per cent in the last 10 days, weaker forecasts have pulled down fourth quarter growth estimates to 19.5 per cent from 20 per cent, according to I/B/E/S data from Refinitiv. Eastern Time. The Dow Jones Industrial Average lost 430 points, or 1.7 percent, to 24,760. The index is now off about 9.4 percent from its September 20 peak. The Dow lost 401 points, or 1.6 percent, to 24,914. The tech-heavy Nasdaq slid 329.14 points, or 4.4 per cent, to 7,108.40.

Energy stocks fell 3.50 percent, the most among the sectors, as oil prices plunged after Saudi Arabia said it could supply more crude quickly if needed, easing concerns ahead of USA sanctions on Iran.

The Cboe Volatility Index, the most widely followed barometer of expected near-term gyrations for the S&P 500, jumped 4.52 points to close at 25.23, its highest close since February 12.

Bond prices rose, sending the yield on the 10-year Treasury note down to 3.14 percent from 3.19 percent late Monday.

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"It's a big global risk-off trade", said Paul Zemsky, chief investment officer of multi-asset strategies and solutions at Voya Investment Management in NY.

The price of crude oil fell, pulling down energy stocks.

The Dow Jones Industrial Average was higher thanks to the gain in Boeing.

TARIFFS TROUBLE: Shares in iRobot gave up 13.5 percent to $79.40 percent after the robotics technology company said tariffs will reduce its profitability in the fourth quarter.

Chip companies also sank following a disappointing forecast from Texas Instruments, which dropped 8.2 per cent. AT&T dropped 6.2 per cent.

The two companies also fell sharply on Tuesday following disappointing results.

3M fell 6.3 per cent after its earnings missed Wall Street's targets.

Facebook, Amazon, Netflix and Alphabet were all trading lower as a result, suffering losses of five percent or more.

Stocks opened sharply lower on Wall Street following big drops in Asia and Europe. Homebuilders declined after the government said sales of new USA homes declined in September for the fourth straight month. Several homebuilders declined following the release of the report. Beazer Homes USA slumped 4.8 percent to $8.77. The company also raised its estimates for the year, citing faster orders for aircraft.

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