Tech stocks lead Wall Street slump as investors shun risk

Why Howard Marks is cautioning investors

A global measure of equity prices fell to a 1-year low on Thursday as Wall Street extended its October slide into a sixth session as investors feared an escalating USA trade war with China and risks from a recent climb in interest rates.

US consumer prices rose less than analysts had forecast in September, reducing expectations the pace of inflation is accelerating despite a tightening labor market. The Dow Jones Industrial Average suffered its worst loss in eight months, falling 3.1 percent to 25,598.74.

What will fall hardest?

U.S. government bonds resumed a selloff after rising to multi-year highs last week, with the 2-year yield rising to 2.906%, its highest level since June 2008. All 30 of the Dow's stocks were in the red and it fell below 26,000 total points for the first time in a month, CNN reported.

The Dow Jones industrial average gave up 738 points, or 2.8 per cent, to 25,686.

Whether the lower reading will quell expectations the Federal Reserve will hike interest rates again in December remains to be seen, said Yousef Abbasi, global market strategist at INTL FCStone in NY.

Stocks fell Wednesday as concerns about global economic growth and ongoing trade tensions continued to hang over Wall Street and after the bond market resumed a sell-off that started last week.

The S&P 500 also fell 3.3 percent, marking its fifth straight decline, and the Nasdaq declined more than 4 percent, its worst percentage decline since June 2016.

"Two weeks ago this kind of news would not have affected the market", he said.

Big moves in interest rates tend to unsettle investors, and they can also push them to sell stocks and buy bonds instead.

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The stock market as a whole, however, had solid reasons behind the fall: rising interest rates.

Luxury retailers tumbled. Tiffany plunged 10.2 percent to $110.38 and Ralph Lauren fell 8.4 percent to $116.96. The stock fell 16.8 percent to 49 cents.

"The speed of changes in bond yields often matters more for equities than the level", Goldman Sachs strategists said in a note.

U.S. gold futures settled up $1.9, or 0.16 percent, at $1,193.4.

The 10-year Treasury yield rose to 3.22 percent from 3.20 percent late Tuesday after earlier touching 3.24 percent.

"That suggests the Fed will keep raising rates, and that's taking the wind out of the stocks that have done the most, particularly in the tech sector".

Oil prices slumped to two-week lows as global stock markets fell, with investor sentiment made more bearish by an industry report showing US crude inventories rising more than expected.

The dollar index fell 0.17 percent, with the euro up 0.25 percent to $1.1518.

Netflix shares fell by 6pc and have now fallen by 12pc in the last five days.

The Australian dollar slipped against major currencies, down to 70.7 U.S. cents, 53.6 British pence, 61.4 Euro cents and 79.5 Japanese yen.

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