Tech stocks lead Wall Street slump as investors shun risk

Tech stocks lead Wall Street slump as investors shun risk

Tech stocks lead Wall Street slump as investors shun risk

Dow Industrial Average Futures were down by about 300 points, or 1.2 percent, in pre-market trading, implying a sharply lower opening on Thursday after falling more than 3 percent on Wednesday.

The biggest driver for the market over the last week has been interest rates, which began spurting higher following several encouraging reports on the economy.

The benchmark Dow index fell 831 points to close at 25,598.74 on Wednesday, wiping out 3.2 percent of its value in the sharpest drop since February.

All 30 Dow stocks were in the red, sending the index below 26,000 points for the first time in a month. Stocks plunged in Taiwan and fell across Southeast Asia.

Facebook fell 4.1 percent while Netflix and Google parent Alphabet were down 8.4 percent and 5.1 percent, respectively.

The increase in yields from these bonds - which are parcels of United States government debt - can hurt stocks since they will provide competition for investors' cash. President Trump has broken from tradition and repeatedly criticized the Fed for raising interest rates. Technology companies were among the losers, with the Nasdaq Composite dropping more than 2% to 7,575.34. It has climbed 27.5 percent since Donald Trump was elected, and is still up 2.1 percent in 2018. That will raise the cost of corporate borrowing and could drag on economic growth.

This time around, strong economic data anxious bond investors, who sent the benchmark yield on Tuesday to 3.261 percent, the highest since early May 2011.

Markets have sold off in recent days as the rate on the 10-year Treasury note flirted with 3.2 percent - its highest level in seven years. Amazon dropped another 2% to $1,719.36 and Apple fell 0.9% to $214.45.

Today technology stocks saw their worst overall day since 2011 as investors concerns continue to mount over rising interest rates. Amazon and Alphabet, respectively the second- and fourth-most valuable US companies, are in what's known as a "correction", a drop of more than 10 percent from a recent peak.

Augustine added that with earnings due out from big banks JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC) on Friday morning, investors will look for new market sectors to take the lead from tech stocks. Amazon dropped another 2 percent to $1,719.36 and Apple fell 0.9 percent to $214.45.

Mona Mahajan, US investment strategist at Allianz Global Investors, said: "The market is digesting the potential that rates moving upwards eventually seep into the real economy in the form of mortgage rates, auto rates, student lending rates". It was at just 3.05% early last week and 2.82% in late August. After years of big gains, those stocks are now out of favor. Wholesale gasoline, heating oil and natural gas also declined. Government data out a day earlier showed the producer price index rebounded to a seasonally adjusted 0.2% after two months of declines.

Gold rose 0.2 per cent to $1,193.40 an ounce.

Related news