Published: Fri, October 26, 2018
Markets | By Erika Turner

Sharp falls wipe out Wall Street's 2018 gains

Sharp falls wipe out Wall Street's 2018 gains

The S&P 500 has now declined for five straight sessions and had finished higher on only four of the 17 trading days this month.

"There was a lot of early morning fear, and when the market didn't accelerate further to the downside, you saw some people coming in to pick up some stocks", said Rick Meckler, partner, Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

The S&P 500 slid by about 3.1 percent, erasing all of its gains for the year.

The Dow Jones Industrial Average dropped more than 600 points Wednesday amid a sharp drop in tech shares. It was up 512 earlier. The top-down themes that pushed the index to decade long highs this year proved some combination of the rejuvenation of the global growth story, the strong global appetite for riskier momentum/growth stocks, and finally sporadic (and fleeting) recoveries in the major bank stocks.

The government is expected to say Friday that the US economy grew by 3.3 percent in the third quarter, after growing by 4.2 percent in the second quarter.

The U.S. economy could begin to slow within "no more than a few quarters", Capital Economics predicted in a research note.

Even after reporting a jump in subscribers last week, Netflix (-9.4%) was pulled down by the broader sell-off. She expects that to change when the dust settles.

Hong Kong's equity market has been hit from all sides this year, caught in a US-led tech selloff, a slump in the yuan, souring sentiment for emerging markets and one of the worst years ever for stocks across the border in mainland China.

Among the big companies slated to release quarterly results this week are Microsoft, Amazon and Colgate-Palmolive.

Trader Tommy Kalikas works on the floor of the New York Stock Exchange, Thursday, Sept. 20, 2018.

AP reported that more than 100 S&P 500 companies are expected to report strong third quarter results this week, and every sector except communications services is expected to show growth. Amazon is the second-most valuable USA stock and Alphabet is fourth.

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Along with worries over profit growth, concerns over the upcoming USA mid-term elections and Italy's budget have also sent investors scrambling out of stocks. Unemployment has dropped to a 49-year-low 3.7 percent. It was last up 0.1 percent at $1.1407.

BOND YIELDS: Bond prices rose, sending the yield on the 10-year Treasury note down to 3.11 percent from 3.16 percent late Tuesday.

The Russell 2000 index of smaller-company stocks gave up 57.89 points, or 3.8 per cent, to 1,468.70. Australia's S&P-ASX 200 dipped 1.1 percent. The heaviest losses came from technology companies including chipmakers Tokyo Electron and Taiwan Semiconductor Manufacturing and South Korea's Samsung Electronics. Valero Energy slid 4.6 percent to $87.44. Bond prices rose, sending yields lower, as investors sought out safer investments.

The tech-heavy Nasdaq composite is on track to end more than 10 percent below its August peak, putting it in what Wall Street calls a "correction".

ENERGY: Benchmark U.S. crude edged up 0.6 percent to settle at $66.82 a barrel in NY. Brent crude fell 76 cents to $75.68 a barrel, while USA crude dropped 40 cents to $66.42.

Wholesale gasoline lost 0.5 percent to $1.81 a gallon.

The Dow lost 462 points, or 1.8 percent, to 24,853.

In Europe: Stoxx 50 +1.1% FTSE +0.6% CAC +1.6% DAX +1%.

METALS: Gold fell 0.5 percent to $1,231.10 an ounce. Copper dipped 0.1 percent to $2.75 a pound.

The dollar weakened to 112.08 yen from 112.23 yen.

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