U.S. stocks plunge in tech-fueled rout

Oct 11 18:10 2018 Print This Article

On Wednesday, U.S. stocks fell dramatically, with the Dow Jones Industrial Average falling more than 800 points. The rout was led by technology stocks, with the NASDAQ Composite Index down 316 points, but all sectors experienced losses.1 This was the worst one-day sell-off for U.S. stocks since February. For much of the day, bonds sold off as well but, by the end of the day, investors fled to the perceived safety of U.S. Treasuries, sending yields lower.

What drove the sell-off?

Stocks began losing ground last week as the yield on the 10-year U.S. Treasury spiked, helped by comments from U.S. Federal Reserve (Fed) Chair Jay Powell, who suggested that the Fed could raise rates significantly before finishing its rate hike cycle. Also placing downward pressure on Treasury prices has been balance sheet normalization as well as higher debt issuance as a result of the U.S. government running a larger deficit. As we have seen before, any significant increase in the 10-year yield typically results in a re-rating of stocks. Less than a month ago, the yield on the 10-year was 2.991% but since then it has risen rapidly, rising above 3.2% in the past week.1 Given that the tech sector has posted such strong returns in the past several years, it should not come as a surprise that it experienced a more severe re-rating than other sectors.

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Trimark Investments Blog

As one of Canada’s leading investment management companies, Trimark Investments is singularly focused on putting investors' interests first. Invesco Canada offers a diversified suite of investment solutions to investors across the country and around the world. The blog is comprised of portfolio managers, who are often asked about their views on various investment-, market- and economy-related topics and how these views impact investment decisions. Trimark Investment blog intends to answer the questions Invesco Canada is frequently asked.

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