US stocks have tumbled, with the S&P 500 and the Dow marking their biggest daily declines since February 8 and technology stocks were at the centre of the carnage as rising US Treasury yields sent investors fleeing from risky assets.
US long-dated Treasury yields rose again in extension of a trend during the past few weeks fuelled by solid US economic data that reinforced expectations of multiple interest rate hikes in the next 12 months.
Investors also worried about the impact of trade tensions on corporate profits and Hurricane Michael’s landfall in Florida adding to the uncertainty.
The Nasdaq on Wednesday registered its biggest daily drop since June 24, 2016, hurt by technology stocks which had their biggest one-day drop since August 2011.
The S&P 500 ended the day down 3.3 per cent, representing a 4.95 per cent drop from its September 20 record closing high.
“It’s a bit of a bloodbath today, clear risk-off action with few places to hide. Gold is up a little bit. The Vix is up more substantially,” said Ed Campbell, senior portfolio manager at QMA, the asset management branch of Prudential Financial.
“It’s primarily the cumulative effect of interest rate moves over the past five days and news reports about trade impacting companies.
“We saw stocks hanging in there pretty good as interest rates were moving and now they’re starting to crack. Markets are starting to contemplate that this could be a Fed that’s overzealous in terms of interest rate hikes.”
The Dow Jones Industrial Average fell 831.83 points, or 3.15 per cent, to 25,598.74, the S&P 500 lost 94.66 points, or 3.29 per cent, to 2,785.68 and the Nasdaq Composite dropped 315.97 points, or 4.08 per cent, to 7,422.05.
All three indices hit records between August 30 and October 3. The Russell 2000 small-cap index closed down 2.9 per cent.
The S&P technology sector dropped 4.8 per cent, with Apple Inc creating the biggest drag with a 4.6 per cent decline.
The communications services, consumer discretionary, energy and industrial sectors showed declines of more than three per cent.
The energy sector was one of the biggest losers for much of the day as US oil production was decimated while the industry waited out Hurricane Michael.
The CBOE Volatility Index rose seven points, or nearly 44 per cent, to 22.96, going above 20 for the first time since April 11 and hitting its highest close since April 2.
The best performer was the defensive utilities sector, which closed down 0.5 per cent.
Declining issues outnumbered advancing ones on the NYSE by a 7.27-to-1 ratio; on Nasdaq, a 7.05-to-1 ratio favored decliners.
The S&P 500 posted 12 new 52-week highs and 47 new lows; the Nasdaq Composite recorded 12 new highs and 227 new lows.
On US exchanges 9.86 billion shares changed hands compared with the 7.42 billion average for the last 20 trading sessions.