Tuesday, 20 February, 2018

U.S. equities plunge on interest rate concerns, mixed earnings

| 03 February, 2018, 14:54

The Dow was down 665.75 points at the closing bell, with the 30-stock index falling below 26,000 to its lowest point since January 16.

The main trigger was growing concern about rising interest rates and inflation, and their impact on stocks going forward, as the yield on the 10-year Treasury note reached its highest peak in four years, analysts said. The point decline for the Dow marked its worst since December of 2008, when it tumbled 680 points. On a percentage basis, the weekly decline, 4.1%, would be the worst for the blue-chip gauge since the 6.2% weekly decline in early January of 2016.

At 2:22 p.m. ET, The Dow Jones Industrial Average was down 503.16 points, or 1.92 per cent, and the S&P 500 was down 46.59 points, or 1.66 per cent, at 2,774.81.

But investors sold off Friday on fears that a stronger-than-expected jobs report would spur the Federal Reserve to raise interest rates more than expected.

USA hiring picked up in January and wages rose at the fastest annual pace since the recession ended, as the economy's steady move toward full employment extended into 2018.

CBS News business analyst Jill Schlesinger said there are two factors behind the plunge: disappointing corporate earnings and fear that economic growth might lead to higher interest rates.

Of the S&P 500 companies that have reported as of Friday morning, 78 percent have beaten bottom-line expectations, while 80 percent have surpassed sales estimates, according to Thomson Reuters. The Nasdaq pulled back 5.4 percent the week of February 5.


The main USA stock index ended the day at 25,520, down 665 points from Thursday's close. The yields on 30-year bonds rose to 3% for the first time since May.

Among the stocks in the Dow, Apple fell 4.3 percent Friday, Exxon Mobil lost 5.1 percent, Chevron was down almost 6 percent and Goldman Sachs dropped 4.5 percent. Chevron also undershot expectations and fell 2.17%.

Amazon.com was a bright spot, up 2.9 percent as Wall Street analysts quickly upped their price targets following the online retailer's impressive earnings report. At 1 pm yesterday UPS made a similar forecast, and took the United States stock market down with it.

The Nasdaq is up 337.56 points, or 4.9 percent.

The FTSE 100 index of leading British shares gave up 0.2 percent. Benchmark U.S. crude slid 41 cents to $65.39 a barrel on the New York Mercantile Exchange.

Traders were still reacting to the news, but shortly after the announcement spread betting quotes were pointing to the Dow Jones average opening at around 25,956, down 231 points, while the S&P 500, which closed at 2,822 last night, was trading at around 2,801. Brent crude, used to price worldwide oils, fell 91 cents, or 1.3 percent, to $68.74 per barrel in London.

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