Brace yourselves — the global rout in stocks is getting worse

The sell-off in U.S. stocks picked up steam, with investors dumping the tech darlings that carried the bull market for much of its record run and retailers who are posting disappointing earnings. Treasuries advanced with the yen and dollar, oil plunged below US$55 a barrel to its lowest price in 12 months.

It’s a fundamentally driven correction

Credit Suisse strategist Mandy Xu   

The S&P 500 Index slid 10 per cent below its record close. The Nasdaq Composite Index erased its gain for the year, and the Dow Jones Industrial Average shed more than 500 points as angst spread across global equity markets.

Investors pointed to escalating trade tension, signs of a looming slowdown in retail growth and cracks in the credit market, but an indiscriminate dumping of the year’s biggest winners still largely characterized the action. Retailers were the worst performing group in the S&P 500, followed by tech hardware.

“It’s a fundamentally driven correction,” Mandy Xu, chief equity derivatives strategist at Credit Suisse, said on Bloomberg Television. “People are very concerned about earnings outlooks, not just in tech but broader across all sectors. And as a result, we’re probably not going to get a v-shaped recovery. People are going to probably wait until next quarter’s earnings to see if growth is holding up.”

Here are some of the equity moves:

Apple Inc. slumped again, bringing its plunge from a recent high to more than 20 per cent. Amazon.com Inc., Facebook Inc. and Netflix Inc. fell at least 2.5 per cent. Chipmakers plunged. Advanced Micro Devices Inc., Micron Inc. and Nvidia Corp. sank more than 5 per cent, with Nvidia’s rout since an Oct. 1 high now more than 50 per cent.Square Inc. lost 10 per cent, Snap Inc. fell 3 per cent and Twitter Inc. lost 6 per cent. Boeing Co. fell 4 per cent to the brink of a bear market. Target Corp. plunged 14 per cent after its sales forecast disappointed; Kohl’s Corp. and L Brands Inc. also sank on weak earnings.

In bond markets, the yield on 10-year Treasuries fell to the lowest level since September. A credit-default swap index of mostly high-yield issuers in Europe reached the highest in almost two years, signalling renewed nerves about the asset class.

The sell-off in momentum stocks continued a slump that began last month, with the latest blow coming from renewed concern that demand for Apple’s iPhones has slowed. At the same time, the Trump administration is considering tighter curbs on technology exports, a step that Deutsche Bank AG says would have a “profound and long lasting adverse impact” on relations between the U.S. and China.

And calls for dip-buying have turned into notes of caution. Goldman Sachs recommended investors hold more cash. Ray Dalio, founder of Bridgewater Associates, the world’s largest hedge fund firm, said that investors should expect low returns for a long time after enjoying years of low interest rates from central-bank stimulus.

Coming Up

It’s a shortened trading week because of the Thanksgiving holiday in the U.S. on Thursday. In addition, Black Friday, the day after Thanksgiving, marks the traditional start to the U.S. holiday shopping season.

These are the main moves in markets:

Stocks

The S&P 500 was down 2.2 per cent at 10:15 a.m. in New York. The Nasdaq 100 Index plunged 2.7 per cent and the Dow Jones Industrial Average fell 560 points, or 2.2 per cent. The Stoxx Europe 600 Index sank 1.6 per cent, hitting the lowest since December 2016. The U.K.’s FTSE 100 Index retreated 1.7 per cent. Germany’s DAX Index lost 2.1 per cent, reaching the lowest in almost two years. The MSCI Emerging Market Index dove 1.8 per cent. The MSCI Asia Pacific Index declined 1.2 per cent, the biggest dip in two weeks.

Currencies

The Bloomberg Dollar Spot Index gained 0.4 per cent. The euro declined 0.5 per cent to US$1.1392, the first retreat in more than a week. The British pound fell 0.2 per cent to US$1.2827. The Japanese yen increased 0.2 per cent to 112.38 per dollar, the strongest in more than three weeks.

Bonds

The yield on 10-year Treasuries declined three basis points to 3.0373 per cent, the lowest since SeptemberGermany’s 10-year yield dipped three basis points to 0.342 per cent.Britain’s 10-year yield advanced one basis point to 1.381 per cent.

Commodities

West Texas Intermediate crude fell 4.5 per cent to US$54.23 a barrel, the lowest since October 2017.Gold fell 0.1 per cent to US$1,222.54 an ounce.

Bloomberg.com

Published at Tue, 20 Nov 2018 15:39:53 +0000