Dow erases gains for the year, tumbles more than 600 points as stocks extend October swoon

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Stocks plummeted on Wednesday as a sharp drop in tech shares and worries about corporate earnings added fuel to this month's steep pullback.

 

 

The Dow Jones Industrial Average dropped 619 points and erased all of its gains for 2018. The S&P 500 dropped 3 percent and also turned negative for the year. The Nasdaq Composite fell 4.4 percent — entering correction territory — as Facebook, Amazon, Netflix and Alphabet all traded lower.

 

"An increasingly murky macro picture is clouding the 2019 earnings outlook leaving investors to largely shrug off a solid start to the third quarter earnings season," said Alec Young, managing director of global markets research at FTSE Russell. "While valuations have certainly come down in recent weeks, at 16 times forward earnings for the Russell 1000 index, they aren't in the bargain basement by any means, especially if earnings growth slows more than expected next year."

 

Facebook and Alphabet both fell more than 4 percent, while Apple dropped 2 percent. Netflix also dropped more than 7.5 percent. AT&T, meanwhile, dropped more than 7.5 percent after releasing its quarterly results.

Equities were also pressures by a decline in hou

sing stocks. The SPDR S&P Homebuilders ETF (XHB) dropped 2.6 percent after the Commerce Department said new home sales hit a near two-year low.

 

"The housing numbers were not good," said JJ Kinahan, chief market strategist at TD Ameritrade. "There's a lot of uncertainty heading into the end of the year. It just feels like people feel more comfortable spending short-term rather than long term."

 

Bank shares, meanwhile, fell broadly as interest rates pulled back. The SPDR S&P Bank ETF (KBE) dropped 3.5 percent. Shares of J.P. Morgan Chase and Citigroup both pulled back more than 1 percent. Bank of America's stock dropped 2.6 percent.

 

Investors have been grappling with increasing market volatility of late. The Cboe Volatility Index (VIX), widely regarded as the best gauge of fear in the market, traded at 23. on Wednesday and is up more than 95 percent this month.

 

The Dow recovered most of a 500-point decline on Tuesday. At its session lows, the Dow had fallen 548.62 points, while the S&P 500 and Nasdaq had lost more than 2 percent each on Tuesday. Still, the 30-stock Dow has lost 500 points this week.

 

Several factors have conspired to knock markets this month — some earnings disappointment, a brewing conflict between Italy and the European Union over budget spending, criticism of oil power Saudi Arabia over the killing of a dissident journalist and finally, worries that world growth is losing steam.

 

"Since early February through late September, US stocks were on a tear, while stocks overseas were mostly stumbling," said Ed Yardeni, president and chief investment strategist at Yardeni Research. "So far this month, the US has coupled with the bearish sentiment overseas."

 

"Valuation multiples have dropped sharply this month, making stocks attractive," he said in a note. This is more of a panic attack "rather than the beginning of a bear market; we believe that the bull market will continue into next year. The next relief rally should be triggered by continued signs of economic growth combined with subdued inflation."

 

Earlier in the session, the Dow rose more than 100 points on the back of better-than-expected results from Boeing. The aerospace giant also raised its full-year guidance on earnings and sales. The report sent the stock up more than 3 percent.

 

The results come as investors slog through the busiest week of the earnings season. More than 100 S&P 500 companies are scheduled to report this week, including Amazon, Alphabet and NBCUniversal-parent Comcast. So far, 80 percent of the companies that have reported have topped earnings expectations, according to data from FactSet.

 

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