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

Sudden jump in U.S. interest rates prompts Wall Street stock plunge

Sudden jump in U.S. interest rates prompts Wall Street stock plunge

USA stock index futures were down slightly late Wednesday after they resumed trading for the overnight session.

Stefane Marion, chief economist and strategist at National Bank Financial, believes that part of the problem with today's stock market is that global companies have been lowering their profit expectations for the next 12 months. Microsoft gave up 3.3 percent.

Adams, of Bloomberg Intelligence, said investors have concerns about their future profitability, too.

The 10-year Treasury note yield traded around 3.23 percent, while the two-year yield reached its highest mark since 2008.

Earlier on Wednesday, Sears Holdings plunged on reports that the struggling retailer is preparing to file for bankruptcy.

The S&P 500 fell nearly 92 points, or just over 3 percent, the biggest daily loss since February this year.

The Dow ended down 831 points, or 3.1%, at 25,598.

The broad-based S&P 500 slumped 3.3% to end at 2,786.46, while the tech-rich Nasdaq Composite Index plummeted 4% to finish the session at 7,427.74.

The Toronto Stock Exchange closed down 336 points, or more than two per cent, on Wednesday, the fourth day in a row that the benchmark Canadian stock index was lower. Amazon skidded 6.2 percent to $1,755.25 and Alphabet, Google's parent company, gave up 4.6 percent to $1,092.16.

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Benchmark US crude oil fell 2.4 per cent to US$73.17 a barrel in NY.

All 30 Dow stocks were in the red, sending the index below 26,000 points for the first time in a month. The price of the bond with the lower interest rate, known as its coupon, will fall enough to raise the yield to mirror the higher rate.

Earnings were a major driver of the market last quarter, and analysts see more robust results ahead, even if companies face growing issues like the yet-to-be-resolved trade war and higher raw-materials costs. Brent crude, the worldwide standard, lost 2.2 per cent to $83.09 a barrel in London.

Alibaba dropped 4.1 percent after Morgan Stanley and Raymond James cut their near-term profit estimates on the Chinese e-commerce company, citing a softer economic environment in China.

The yield on the 10-year Treasury rose to 3.23 percent, the highest level in seven years. Heating oil fell 1.2 per cent to $2.39 a gallon.

US gold futures settled up $1.9, or 0.16 percent, at $1,193.4. Silver dipped 0.5 per cent to $14.33 an ounce.

The CAC 40 in France dropped 2.1 percent, Germany's DAX lost 2.2 percent and the FTSE 100 in London fell 1.3 percent. The Nasdaq composite fell 152 points, or 2 percent, to 7,585.

When investors expect rates to rise, the prices of bonds paying lower interest rates falls. The stock fell 15 per cent to 50 cents. Brazil's Bovespa lost 2.5 percent and the Merval in Argentina sank 2.2 percent.

The euro and sterling rose, underpinned by optimism for a Brexit deal, while the USA dollar lost ground against a basket of currencies even as US yields hovered near multiyear peaks.

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