Dow sees worst day in two years as bond yields bounce

Monday, 05 Feb, 2018

Weak earnings from several giant USA companies including Exxon Mobil and Alphabet, Google's parent company, further dented investors' confidence.

Stocks open sharply lower after this morning's stronger than expected jobs report pushed interest rates higher; Dow -0.9%, S&P and Nasdaq -0.8%.

The Dow alone slumped more than 650 points, or 2.5 percent to 25,520.96. The Nasdaq slid 136 points, or 1.9 percent, to 7,246. The index is still up more than 3 percent since the year began.

The stock market plummet comes despite some positive economic indicators, such as 200,000 new jobs created last month, average earnings up by 2.9% since last January and the overall unemployment rate standing at 4.1%, according to statistics put out by the Bureau of Labor Statistics Friday. The figures point to an economy on strong footing even in its ninth year of expansion, fueled by global economic growth and healthy consumer spending at home.

Bond prices on Friday declined again, pushing yields higher.

Average hourly earnings posted a 0.3 per cent gain for the month and an annualized gain of 2.9 per cent.

That helped the yield on 10-year Treasuries surge to 2.845% which is the highest it has been since January of 2014, which means that Treasuries returns could become more attractive than stocks.

Forecasts for earnings, one of the fundamental factors that drives stock prices, are rising fast as analysts factor in benefits from the USA tax overhaul. Both of those new-media powerhouses recently reported good quarterly earnings.

Specialist Anthony Matesic left and trader Gordon Charlop work on the floor of the New York Stock Exchange Monday Feb. 5 2018. Stock markets around the world took another pummeling Monday
Dow sees worst day in two years as bond yields bounce

The Standard & Poor's 500 index fell 58 points, or 2.1 percent, to 2,763 as of 3:07 p.m.

In small-caps, the Russell 2000 Index closed at 1,547.27 for a loss of -32.59 points or -2.06%. The stock was down $4.36 to $163.42.

With half of the S&P 500 index companies still to report fourth-quarter results and potentially give guidance on 2018, profit estimates are likely to increase further. The online retail giant said it sold more voice-activated gadgets, enlisted new Prime members and benefited from its recent purchase of Whole Foods.

The pan-European FTSEurofirst 300 index of leading regional shares lost 0.98 per cent and the STOXX 600 index tumbled 1.07 per cent.

U.S. WTI crude oil -1.4% at $64.89/bbl.

Still, the Dow Jones industrials are 39.2 percent higher since Trump was elected despite Friday's pullback.

In the S & P 100, Exxon also was the worst performer, followed closely by Google (-5.23% at 10:00 am).

Sinking tech stocks pressured Asian benchmarks today, with South Korea's Kospi suffering the most among its regional peers.