Stocks plummeted once again on Wednesday, resulting in the Dow and S&P 500 erasing gains for the year and the Nasdaq entering correction territory. Wednesday’s decline was led by a sharp decline in tech stocks, with chipmakers offering disappointing forecasts, coupled with worries about corporate earnings and concerns over global economic growth. Weak home sales data added to the worries.
The Dow Jones Industrial Average (DJI) plummeted 2.4% to close at 24,583.42. The S&P 500 declined 3.1% to close at 2,656.10. The Nasdaq Composite Index closed at 7,108.4, declining 4.4%, to enter correction territory.
The CBOE Volatility Index, a gauge of investor anxiety, surged 4.52 points, to close at 25.23, its highest close since Feb 12. A total of 9.6 billion shares were traded on Wednesday, higher than the last 20-session average of 8 billion shares. Decliners outnumbered advancers on the NYSE by a 3.38-to-1 ratio. On Nasdaq, a 5.42-to-1 ratio favored declining issues.
How did the Benchmark Perform?
The Dow gave up 606.11 points, erasing all of its gains for 2018. However, shares of Boeing increased 1.3%. Shares of Caterpillar, Inc. CAT and 3M Company MMM plummeted 5.6% and 4.2%, respectively. Caterpillar has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
The S&P 500 shed 84.59 points, extending its losses to the sixth consecutive day and erasing all of its gains for 2018. The Communication Service Select Sector SPDR (XLC) declined 4.8%, while the Technology Select Sector SPDR (XLK) lost 4.5%. The Energy Select Sector SPDR (XLE) declined 4%. Eight of the 11 major S&P 500 sectors ended in the red.
The tech-heavy Nasdaq, dropped 329.14 points, putting the index more than 10% below its all-time high recorded on Aug 29, thus entering correction territory. The Nasdaq also posted its worst day since Aug 18, 2011. Shares of Netflix, Inc. NFLX and Amazon.com, Inc. AMZN plummeted 9.4% and 5.9%, respectively. Shares of Facebook, Inc. FB and Alphabet Inc. GOOGL declined 5.4% and 5.2%, respectively.
Concerns of Slowing Global Growth, Corporate Earnings Rattle Markets
Stocks have been taking a beating in October, with the S&P 500 falling 8.9% on a month-to-date basis. Growing concerns about slowing global economic growth have been making investors jittery. Also, last week China said that its economy slowed down in the July-September quarter, growing 6.5%, down from 6.7% registered in the previous quarter.
Market watchers think that if China experiences further problems, the pain could spread to other emerging economies and eventually to the United States. Also weak projections from chipmakers Texas Instruments Incorporated TXN and STMicroelectronics N.V. STM owing to slowing demand further deepened the selloffs.
Growing concerns about rapidly rising interest rates after Fed’s indication that it will continue to tighten monetary conditions by the year end have been denting investor sentiment. Investors have also been feeling shaky after some disappointing earnings results from a few megacaps along with rising geopolitical tensions. The fears continued to spread through Wednesday, leading to huge selloffs.
Weak Home Sales Data Weigh on Markets
On Wednesday the Commerce Department said that sales of new single-family homes fell to a two-year low in September. This is an indication that higher prices and rising mortgage rates have been affecting demand. This report weighed on homebuilder stocks, lead to further selloffs.
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Netflix, Inc. (NFLX) : Free Stock Analysis Report
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