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Stocks Head for Sixth Loss, Shrug off Tech Gains

Stock MarketsOct 11, 2018 02:30PM ET
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© Reuters. Stocks head for another big loss.

(Bloomberg) -- U.S. stocks fell for a sixth day, extending the longest losing streak of Donald Trump’s presidency, as energy companies and utilities plunged and tech couldn’t maintain earlier gains. The dollar fell with oil, Treasuries rose and gold posted its biggest gain in more than two years.

The S&P 500 Index dropped more than 1 percent on the day and is down nearly 6 percent in the past six sessions. The tech-heavy Nasdaq indexes surrendered earlier rallies and added to their declines on Wednesday. Trading was heavy with volume surging roughly 55 percent above average for this time over the past 30 days.

“This is just a normal run-of-the-mill correction that happens to be concentrated in some of the more expensive and most notable names in technology,” said Jamie Cox, managing partner at Harris Financial Group. But I think it’s been precipitated by the uncertainty about global growth and whether or not Fed policy is going too far too fast.

In addition to energy, insurers and household products manufacturers weighed on the market, while media companies and software makers were among the few bright spots. The Cboe Volatility Index declined but remained close to its highest level since April.

“Volatility is back and it may require more active strategies on the part of investors to pursue their long-term goals,” John Lynch, chief investment strategist for LPL Financial wrote in a note to clients Thursday. “Volatility is also not to be feared, but embraced, as varying data points will cause bouts of market anxiety. But remember that fundamentals are still strong.”

Earlier, Asian and European equities plunged as the market rout extended around the world. China’s Shanghai Composite gauge closed down more than 5 percent and Taiwan’s technology-heavy benchmark plummeted more than 6 percent. Europe’s main equity index fell to the lowest since early 2017. The euro and the pound both advanced.

Investors seeking to pinpoint the cause of the current rout in equities have no shortage of culprits: U.S companies are increasingly fretting the impact of the burgeoning trade war, while the same issue prompted the International Monetary Fund to dial down global growth expectations. In the tech sector, which was a key driver of the rally that pushed American equities to a record just a month ago, expensive-looking companies have been roiled by a hacking scandal.

Against this backdrop, the Federal Reserve has been trimming its balance sheet and raising interest rates, provoking the ire of an unpredictable American president and helping force a repricing of riskier assets.

“What you’re seeing right now is a bit of a panic -- we wouldn’t say this looks like the end of the cycle,” said William Hobbs, head of investment strategy at Barclays (LON:BARC) Investment Solutions in London. “You’ve got to try to keep the skin in the game for as long as possible because it’s an incredibly profitable period of the cycle to be invested through if you can keep your nerve.”

Elsewhere, West Texas Intermediate crude tumbled toward $71 a barrel amid a broad decline in commodities as OPEC cut estimates for demand. Precious metals gained with gold. A Bloomberg index of cryptocurrencies dropped as much as 11 percent.

Here are some key events coming up:

  • The U.S. Treasury is in the midst of $230 billion worth of debt auctions this week.
  • The IMF and World Bank will hold meetings in Bali beginning Friday, where finance chiefs from around the world will gather.
  • JPMorgan Chase & Co (NYSE:JPM)., Citigroup Inc (NYSE:C). and Wells Fargo (NYSE:WFC) & Co. kick off earnings season for U.S. banks on Friday.

These are the main moves in markets:

Stocks

  • The S&P 500 Index was down 1.2 percent as of 2:20 p.m. in New York.
  • The Dow Jones Industrial Average declined 1.1 percent, while the Nasdaq 100 Index slid 0.6 percent.
  • The Stoxx Europe 600 Index sank 2 percent to the lowest since December 2016.
  • The MSCI Asia Pacific Index plunged 3.3 percent to the lowest since May 2017.
  • The MSCI Emerging Market Index dropped 3.1 percent to the lowest since April 2017 on the biggest decline in more than two years.

Currencies

  • The Bloomberg Dollar Spot Index fell 0.5 percent.
  • The euro increased 0.6 percent to $1.1586.
  • The British pound added 0.2 percent to $1.3219.
  • The Japanese yen rose 0.2 percent to 112.06 per dollar.

Bonds

  • The yield on 10-year Treasuries declined two basis points to 3.14 percent.
  • Germany’s 10-year yield decreased three basis points to 0.517 percent.
  • Britain’s 10-year yield dipped five basis points to 1.674 percent.

Commodities

  • The Bloomberg Commodity Index declined 0.5 percent.
  • West Texas Intermediate crude decreased 2.9 percent to $71.02 a barrel.
  • Gold rose 2.4 percent to $1,223.22 an ounce, its biggest gain since June 2016.
Stocks Head for Sixth Loss, Shrug off Tech Gains
 

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Kevin Dixon
K9US Oct 11, 2018 4:09PM ET
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