Published: Thu, October 11, 2018
Markets | By Otis Pena

Nikkei plunges by over 1000 points in afternoon trading

Nikkei plunges by over 1000 points in afternoon trading

And there is still an overhang from the US trade dispute with China, which accounts for sizeable portions of some tech companies' revenue.

"The tax cuts juiced earnings this year and that's not sustainable", he said.

The blue-chip index plunged more than 830 points - or 3.2 percent - at its close as traders fretted about raising interest rates and the sell-off of once-high-flying tech stocks.

The Dow Industrials opened down more than 100 points, while the S&P 500 and Nasdaq fell as well, but all three indexes were up by 10 am ET. Eastern time. It's on track for its fifth straight drop, which hasn't happened since right before the 2016 presidential election.

At 12:44 p.m., the Nikkei 225 average traded at 22,496.24, down 1,009.80 points, or 4.30 percent, from Wednesday's closing. It has fallen 7.5 percent in just five days. XRP and Tron, which had an overall bullish September, too fell drastically - by over 10 percent each, indicating the previous upsides were only hype-centered.

The market had enjoyed a stretch of relative calm, where even big intraday losses were erased by the end of the day.

Microsoft dropped 4 per cent to $107.82. Boeing lost 4.7 per cent to US$367.57 and Alphabet, Google's parent company, gave up 4.6 per cent to US$1092.16. The S&P 500 was off by 1.7 percent, putting it on pace for its first five-day losing streak in two years.

Insurance companies dropped as Hurricane Michael continued to gather strength and came ashore in Florida bringing winds of up to 155 miles an hour. Berkshire Hathaway dipped 4.7 per cent to US$213.10 and reinsurer Everest Re slid 5.1 per cent to US$217.73.

Tom Cahill of Ventura Wealth Management said investors were unnerved by remarks from luxury company LVMH of a crackdown on some goods in China amid the country's bitter dispute with the US.

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

This time around, strong economic data anxious bond investors, who sent the benchmark yield on Tuesday to 3.261 percent, the highest since early May 2011.

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Bond yields and therefore interest rates have been rising for more than two years as the US economy grew strong.

"If investors are going to take profits then it will be from some of the bigger, high-growth names", Nauman said.

The increase in yields from these bonds - which are parcels of USA government debt - can hurt stocks since they will provide competition for investors' cash.

The move particularly affects high-growth tech companies which have been a source of huge returns in recent months. That's helped make technology stocks more volatile in the last few months.

"Amazon recently announced they were increasing wages, Facebook is spending a ton on security", she said.

Sears Holdings plunged 32 percent after the Wall Street Journal said the debt-laden retailer was preparing for a possible bankruptcy. In the previous session, the stock jumped 15 per cent on a Globe and Mail report that Altria Group was in talks for acquiring a stake.

Many investors now believe that the Federal Reserve's campaign to "normalize" monetary policy, reversing years of extraordinary support that included the quantitative easing bond buying program and keeping its overnight target very low, will push interest rates higher than previously thought. Over the years, Sears has closed hundreds of stores and sold several famous brands.

Benchmark US crude oil fell 2.4 per cent to US$73.17 a barrel in NY. Brent crude, the worldwide standard, lost 2.2 per cent to US$83.09 a barrel in London. Heating oil fell 1.2 per cent to $2.39 a gallon.

Gold rose 0.2 per cent to $1,193.40 an ounce. The Japanese yen strengthened 0.53 percent versus the greenback at 112.36.

Asian markets were broadly lower on Thursday after Wall Street slumped on a heavy selling of technology and internet stocks.

Investors are wary of possible further USA interest rate hikes. Brazil's Bovespa lost 2.5 per cent and the Merval in Argentina sank 2.2 per cent.

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