Arthur J. Villasanta – Fourth Estate Contributor
New York, NY, United States (4E) – Highly volatile U.S. equity markets plunged for the second straight day in a continuation of the bloodbath on October 10 that later savaged world markets.
Investors are fleeing riskier assets like stocks and piling onto traditional safe havens like bonds and gold. They now turn for some succour to corporate earnings reports — which are widely expected to be on the upside — to be released Friday. A market correction is now a distinct possibility.
And all this is taking place in October, a month notorious for its long list of painful sell-offs in the past.
Stocks fell sharply Thursday in a second straight day of fear and angst on Wall Street. Analysts said investors are ditching equities worldwide because of fears of rapidly rising interest rates and a possible global economic slowdown due to Trump’s trade war.
The blue chip Dow Jones Industrial Average closed 545.91 points lower at 25,052.83, bringing its two-day losses to more than 1,300 points. The combined loss wiped-out the Dow’s gains for the entire year.
The S&P 500, the large-company stock index, fell 2.1 percent to 2,728.37 and posted its sixth straight decline. The NASDAQ Composite retreated 1.3 percent to 7,329.06. It did, however,briefly enter correction territory at its lows on Thursday. The broad index also closed below its 200-day moving average for the first time since April.
The Dow fell as much as 698.97 points at its lows during the day. The indices temporarily recovered after a report said President Donald Trump and Chinese President Xi Jinping planned to meet at next month’s G-20 summit, instilling a fleeting hope the full-blown trade war between both countries might not worsen any further.
The S&P 500 has lost 6 percent during so far this month and is now higher by just 2 percent for 2018.
Tech stocks, the long-time market leaders, have been hit hard in the latest rout as Chinese tariffs and security concerns over Made in China tech products have put these companies in a bad light. The NASDAQ, however, performed better than both the Dow and the S&P 500 on Thursday.
Despite this, the NASDAQ is still 9.6 percent off its all-time high in late August. FAANG stocks took a beating. Amazon fell 2.04 percent; Apple stood 0.88 percent lower; Netflix gave up 1.47 percent while Google tripped by 0.18 percent. Facebook, however, ended higher.
The Russell 2000, an index of small-company stocks, fell into official correction territory after sliding nearly 2 percent in Thursday’s bloodbath. The index is now 11.2 percent below its August 31 record high.
“This is another bad day,” said Brad McMillan, chief investment officer at Commonwealth Financial Network. “One of the discouraging things is the market really tried to rally during the day and it couldn’t hold on to it.”
“Is this the big one? Is it 2008? I think the better comparison is where we were at the end of January,” said McMillan.
Investors remain antsy over tariff concerns and a recent jump in interest rates. Trump added fuel to the fire by blasting the Federal Reserve for continuing to increase a benchmark rate affecting both business and consumer loans.
“It’s a momentum correction, not a portfolio correction,” said Joe Terranova, chief market strategist at Virtus Investment Partners. “While we have a bias to believe 2008 could happen again, I don’t think this is the case.”
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