Stocks went mad on Wednesday and not for the right reasons, the Dow plummeted more than 800 points in its worst trading day since February with indexes finishing well in negative territory as the Dow was down 3.15%, the S&P 500 fell 3.29% and the Nasdaq nosedived 4.08% which saw the tech sector experience its worst day in seven years. All of the Dow 30 stocks finished in negative territory and only 16 stocks out of the 500 total on the S&P 500 bucked the trend and finished higher. In news coming out in morning, President Trump has labelled the Federal Reserve as crazy by continuing to raise interest rates. Dow futures have fallen and are down approximately 300 points.
Equities sank on fears of rapidly rising interest rates which in recent days has seen a soar in treasury yields along with concerns of growing inflation in the US economy. However, despite the recent difference in price action in the recent days between yields and the stocks, where yields would rise and stocks would sell off – overnight we saw both sell away. In addition, adding to the pessimistic sentiment in the markets, we saw the International Monetary Fund (IMF) cut global economic growth forecasts for 2018 and 2019 due to the impact of the trade war between the US and China.
Shares of the larger household names which weigh on the indexes led the declines as Amazon shares fell 6.15%, Apple was down 4.63%, Microsoft shares declined 5.43%, Alphabet (Google) shares sank 4.63% and Netflix which saw shares decline 8.38%. Investors tried to change the channel but all they saw was red on the screen. The overall tech sector fell 4.77% and out of the eleven S&P 500 sector indexes, all declined for the day. The only winner overnight was volatility where the VIX closed at 22.96 up 44%. There wasn’t much good news among stocks apart from some of the retailers gaining ground as Dollar Tree shares rose 1.65% and JM Smucker rose 1.54%. However, the bears dominated the trading session as peers Tiffany& Co shares fell 10.22% and Ralph Lauren shares sank 8.44%.
Oil prices also suffered as a result of the stock market sell off combined with the effects of Hurricane Michael in the US. Brent crude closed at $83.09 down 2.2% which saw the like of Exxon Mobil shares fall 2.30% and Chevron down 3.33% yet Hess Corp and Marathon Oil took the biggest hit in the sector, were down 7.41% and 7.72%, respectively. In currency markets, the US dollar was steady as the dollar index fell 0.11% to 95.407 and the safe haven Japanese Yen strengthened to 112.25.
Investors should pay close attention to inflation figures coming out of the US at 11:30pm (AEDT) time ahead of the earnings season which is set to kick off on Friday with the likes of Citigroup, JP Morgan and Wells Fargo report.
Chart of the Day: Dow Jones CFD (US 30) Daily chart