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Another wild sell off: Dow sinks 546 points

The stomach-churning market scare continues.The Dow tumbled 546 points, or 2.1%, on Thursday followin...

Posted: Oct 12, 2018 9:29 AM
Updated: Oct 12, 2018 9:29 AM

The stomach-churning market scare continues.

The Dow tumbled 546 points, or 2.1%, on Thursday following another rollercoaster session. The index briefly turned positive during morning trading before succumbing to heavy selling pressure. At one point the Dow was down 699 points. The Dow has shed 1,378 points over the past two days.

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Trade wars

The mood on Wall Street was only slightly calmer than Wednesday's 832-point nosedive.

The S&P 500 closed down 2.1%, notching its sixth-straight losing session. It's the longest slump for the broad index since just prior to President Donald Trump's election more than two years ago.

The Nasdaq briefly tumbled into a correction, signaling a 10% decline from previous highs. But the index climbed out of correction territory and closed down 1.3%.

All three major indexes have lost more than 5% this week. That hasn't happened since March.

"This kind of washout doesn't get accomplished in a day. Even though yesterday felt traumatic, it tends to be a three-day process," said Art Hogan, chief market strategist at B. Riley FBR.

The VIX volatility index touched its highest level since February.

One positive is that unlike on Wednesday, the market did not close on the lows of the day. The rebound was helped by fresh reports that President Donald Trump and Chinese leader Xi Jinping have agreed to meet next month at the G-20 summit. Such a meeting could ease fears that the US-China trade war will hurt corporate profits and slow the US economy.

Tech stocks have come under fire because they are some of the riskiest and most expensive parts of the market. Investors fear how these momentum names will hold up in a downturn, particularly as interest rates spike. A proxy for the tech sector had its sharpest plunge in seven years on Wednesday.

"Halloween started early this month for investors," Ed Yardeni, president of investment advisory firm Yardeni Research, wrote to clients.

The afternoon sell-off comes even though a new report showed that consumer prices rose less than expected in September.

Stocks have turned sharply south in large part because investors are concerned about rising interest rates. As the Federal Reserve raises rates to prevent runaway inflation, investors have been getting out of bonds, driving down their price and driving up their yields. Suddenly, the return on bonds has become competitive with some stocks — particularly risky tech stocks.

Rising interest rates also increase borrowing costs for households and businesses, eating into corporate profits.

Inflation, tariff worries

Some US companies have recently warned about pain from rising costs. Paint company PPG Industries (PPG) spooked investors on Tuesday by saying it's paying more for chemicals, oil and shipping. Fastenal (FAST), another industrial company, suffered a surprise decline in margins due to spiking freight costs. And the company warned of potential trouble from the US tariffs on China.

Wall Street is getting increasingly nervous about the ongoing trade war between the United States and China. While US growth has remained on track, China's economy is showing signs of a slowdown. Citing the trade fight, the IMF on Monday lowered its 2019 growth projections for both the US and China.

"The downgrade from the IMF underscores this is a very real threat. It's really a gamechanger," said Kristina Hooper, global market strategist at Invesco.

If Trump and Xi officially announce a meeting at the G20 summit, it could help tamp down market fears about the trade war.

Hogan said the problem is that investors "don't see an exit on the trade war highway. We're escalating our rhetoric with China."

Are stocks oversold?

Global markets lost ground overnight. Stock indexes in the United Kingdom, Germany and France all fall by more than 1%. Benchmark indexes in Shanghai and Tokyo closed down 5.2% and almost 4%, respectively. Hong Kong's market was down over 3%.

There were plenty of other jitters. Gold, which often rises during times of stress, climbed nearly 3%. That hasn't happened since June 2016. The Fear & Greed Index, a CNN Business gauge of market sentiment, is flashing "extreme fear." Just a month ago the index was comfortably in "greed" territory.

However, Yardeni is optimistic the market will rebound because corporate profits are robust and no recession is in sight.

"We remain bullish on the outlook for earnings, and expect the market to recover and make new highs going into next year," Yardeni wrote.

Indiana Coronavirus Cases

Data is updated nightly.

Cases: 1118335

Reported Deaths: 17712
CountyCasesDeaths
Marion1455892240
Lake724831254
Allen67063882
Hamilton51060487
St. Joseph49820649
Elkhart40268546
Vanderburgh34714497
Tippecanoe30808276
Johnson27696467
Hendricks26313385
Porter25657386
Madison21131455
Clark20238279
Vigo19059309
LaPorte17192261
Howard16770314
Delaware16761303
Monroe16628220
Kosciusko14293167
Hancock13113186
Bartholomew12983190
Warrick12210190
Wayne12090269
Floyd12011226
Grant11998245
Morgan10409192
Boone9869124
Noble9316122
Henry9177169
Marshall9152147
Dearborn8970100
Dubois8835140
Shelby8281130
Cass8167128
Lawrence8057185
DeKalb7817109
Jackson770793
Huntington7661115
Gibson7102118
Montgomery7101123
Harrison6954100
Knox6915116
Steuben669089
Whitley659660
Miami6595113
Putnam645085
Clinton627179
Wabash6221111
Jasper613192
Jefferson5856105
Ripley557294
Adams542281
Daviess5076117
Scott491580
Wells4836105
White478469
Greene4701101
Clay464662
Decatur4611110
Fayette452496
Jennings452067
LaGrange427491
Posey410044
Randolph3944107
Washington390956
Fountain375964
Fulton364874
Spencer362247
Starke355574
Owen353577
Sullivan348555
Orange331372
Jay331050
Rush309533
Carroll296239
Franklin292744
Perry290553
Vermillion283658
Tipton251167
Parke250130
Pike248644
Blackford222144
Pulaski210359
Newton182452
Brown177550
Crawford169129
Benton168417
Martin152120
Switzerland147612
Warren135816
Union122616
Ohio92413
Unassigned0595

Ohio Coronavirus Cases

Data is updated nightly.

Cases: 1731003

Reported Deaths: 26851
CountyCasesDeaths
Franklin1803711843
Cuyahoga1698662655
Hamilton1144371544
Montgomery810251405
Summit726231210
Lucas636141027
Butler57225814
Stark543091183
Lorain42754645
Warren36183417
Mahoning36035788
Lake32696501
Clermont31523369
Trumbull27614620
Delaware27394185
Licking26829344
Medina26290353
Fairfield24812287
Greene24540373
Clark22327390
Portage21504283
Richland21257342
Wood20300248
Allen19119326
Miami17456352
Columbiana17014335
Muskingum16873207
Wayne15873307
Tuscarawas14579362
Marion13440196
Ashtabula12927237
Erie12790199
Scioto12556188
Pickaway12308155
Ross11780226
Hancock11623175
Geauga11042179
Lawrence10698172
Belmont10509234
Huron9867159
Jefferson9687228
Union963775
Sandusky9428166
Seneca8993161
Knox8869176
Washington8714159
Darke8435181
Athens841897
Ashland8102152
Auglaize8018120
Shelby7551135
Defiance7418117
Crawford7356150
Fulton7262113
Brown7217116
Logan7061111
Guernsey700586
Mercer6959100
Highland6807120
Clinton6547106
Williams653899
Madison652590
Preble6334140
Putnam6288122
Champaign585187
Jackson584597
Perry570579
Ottawa5689102
Coshocton5688108
Morrow521765
Fayette497272
Hardin4947100
Gallia474278
Van Wert469395
Pike467678
Adams4619110
Henry439280
Hocking412493
Holmes4035141
Wyandot379275
Carroll371178
Paulding326351
Meigs307561
Monroe236861
Noble221549
Morgan219039
Harrison215253
Vinton189138
Unassigned06
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Colder air continues to filter into the region, and we will experience the coldest day since February 2021.
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