Dow Jones industrials sink 700 points as bond yields rise

Andrew Cummings
October 12, 2018

The Dow Jones industrial average had its second-biggest drop of the year, plunging almost 500 points, or 1.9 percent, shortly after 2:00 p.m.

But it was the rout across the Atlantic (Shanghai: 600558.SS - news) that proved even more eye-catching with the rise in US Treasury bond yields to seven-year highs seen as a key factor.

Along with tech stocks, the FAANGs " Facebook, Amazon, Apple, Netflix and Alphabet" have led the market rally.

The S&P 500 index fell 4 points, or 0.1 percent, to 2,781.

The Dow Jones Industrial Average gave up 831.83 points, or 3.1 percent, to 25,598.74. The stock fell 35.7 percent to 38 cents in morning trading. The Nasdaq composite skidded 92.99 points, or 1.3 percent, to 7,329.06.

USA stocks are falling again a day after their biggest drop since February.


Although that's largely because the USA economy is so strong, the spike in rates for the benchmark U.S. 10-Year Treasury has investors wondering if the near-decade-old bull market may finally be ending.

The recent turbulence in financial markets is a contrast to what investors have grown accustomed to in a bull market that has lasted more than 10 years, the longest in history. The pan-European FTSEurofirst 300 index of leading regional shares closed down 1.57 percent.

All three indexes hit records between August 30 and October 3, despite the escalating Sino-US trade dispute gnawing at confidence on corporate profit growth through most of the year.

Gina Martin Adams, the chief equity strategist for Bloomberg Intelligence, said investors are concerned about the big increase in yields, which makes it more expensive to borrow money.

"The direct concern is higher interest rates", said Rick Meckler, partner, Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

US crude fell 1.98 per cent to $71.72 per barrel and Brent was last at $81.30, down 2.15 per cent on the day.


United States stocks notched solid gains in the third quarter as investors brushed aside worries about trade wars and focused on strong corporate earnings and solid United States economic data. Amazon plunged 6.2 percent.

"If the Feds are insane, this market reaction is bordering on insanity, as so many negative crosscurrents collide that is merely impossible to find a glint of optimism", he added.

After months of declines, the price of gold jumped by the most in two years, rising 2.9 percent to $1,227.60 an ounce.

Eight of the 11 sectors were lower, with only the defensive utilities, real estate and consumer staples sectors higher.

The dollar fell to 111.94 yen from 112.59 yen, and the euro rose to $1.1594 from $1.1525.


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