Stocks suffered their worst losses in eight months on Wednesday, led by a steep decline in tech stocks, due to concerns of rapidly rising interest rates. Fears of slowing global growth continued to linger, which made investors jittery, leading to huge selloffs. The S&P 500 and Dow Jones recorded their worth day since Feb 8, while the S&P 500 technology sector had its worst day in seven years. The Nasdaq also witnessed its worst day since the last week of June.
The Dow Jones Industrial Average (DJI) slipped 3.2%, to close at 25,598.74. The S&P 500 skidded 3.3% to close at 2,785.68. The Nasdaq Composite Index closed at 7,422.05, plummeting 4.1%. The CBOE Volatility Index (VIX) jumped 7 points or almost 44% to 22.96, crossing the 20 mark for the first time since Apr 11 and recording its highest close since Apr 2.
A total of 9.86 billion shares were traded on Wednesday, higher than the last 20-session average of 7.42 billion shares. Decliners outnumbered advancers on the NYSE by a 7.27-to-1 ratio. On Nasdaq, a 7.05-to-1 ratio favored declining issues.
How did the Benchmarks Perform?
The Dow shed 831.33 points, registering its worth daily decline since Feb 8. Tech stocks wreaked havoc, with shares of Intel Corporation INTC and Microsoft Corporation MSFT declining 3.8% and 5.4%, respectively.
The S&P 500 skidded 94.66 points, falling for the fifth straight day and marking its longest losing streak since November 2016. The index also witnessed its worst daily decline since Feb 8. Tech stocks were at the helm of the carnage, with the Technology Select Sector SPDR (XLK) declining 4.8%, its steepest decline since Aug 18, 2011.
Shares of Twitter, Inc. TWTR and Apple Inc. AAPL declined 8.5% and 4.6%, respectively. Apple has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
All the 11 major S&P 500 sectors ended in negative territory. The Materials Select Sector SPDR (XLB) declined 3.3%, while the Communication Services Select Sector SPDR (XLC), Financial Select Sector SPDR (XLF) and Industrial Select Sector SPDR (XLI) fell 4%, 2.9% and 3.3%, respectively.
The tech heavy Nasdaq lost 315.97 points, registering its biggest decline in 2018. Shares of Netflix NFLX plunged 8.4%. Shares of Amazon.com, Inc. AMZN and Facebook, Inc. FB declined 6.2% and 4.1%, respectively.
The Dow also closed below its 50-day moving average for the first time since Jul 6, while the S&P 500 fell below both its 50-day and 100-day moving averages. The S&P 500 ended below its 100-day moving average for the first time since Jun 27. The Nasdaq witnessed its worst day since Jun 24, 2016, when it declined 4.12%. Of the 505 stocks in the S&P 500, more than 330 ended the day more than 10% below their 52-week highs.
Rising Interest Rates Rattle Markets
Concerns over rising interest rates have been weighing on markets since last week. The trend has been continuing this week too. This brought equities under pressure on Wednesday as well. The 10-Year Treasury yield rose to around 3.23%, after hitting its highest level since 2011. Also the two-year yield reached its highest mark since 2008. Rising interest rates have been igniting fears that higher borrowing costs will slow down the economy.
On Wednesday rates rose after U.S. government released data that reflected a rebound in producer prices in September. The producer price index rose 0.2% in September and up 2.8% year over year. Producer price index is a highly followed metric for gauging inflation. This further made investors jittery, leading to huge selloffs.
IMF Lowers Growth Forecast
Tech stocks have been one of the best performers this year. However, tech stocks have also taken a blow or rising fears of a trade war. On Monday the International Monetary Fund cut its global growth forecast to 3.7% for both 2018 and 2019, according to the quarterly Economic Outlook Report Outlook, issued on Monday. The new forecast is 0.2% lower than its prior forecast made in July for both the years.
The new forecast also projects weaker growth in major economies, higher oil prices and increasing trade tensions. On Wednesday, tech stocks which are considered sensitive to trade tensions once again took a hit with shares of major tech companies plummeting before the start of the third-quarter earnings season. The tech rout saw the overall broader market taking a hit.
Stocks That Made Headlines
PepsiCo Inks Deal With Loop for Sustainable Product Packaging
PepsiCo, Inc. PEP has taken a step closer to eliminate non-recyclable plastics by signing a multi-year supply agreement with Loop Industries, Inc., a leading technology company in sustainable plastic. (Read More).
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana. Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Netflix, Inc. (NFLX) : Free Stock Analysis Report
Facebook, Inc. (FB) : Free Stock Analysis Report
Twitter, Inc. (TWTR) : Free Stock Analysis Report
Pepsico, Inc. (PEP) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Intel Corporation (INTC) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research