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Home / Business / Dow drops sharply as two industry giants warn about problems

Dow drops sharply as two industry giants warn about problems



U.S. Markets spiked most of the day deep into the red of one of the year's most profitable earnings meetings, as a worldwide sell-off and a disappointing report from 3M – a large industrial firm that keeps a window on the US economy – sent out nervous investors [19659-4] During the afternoon trade, all three indices had suffered significant losses. At 15.00, the Dow Jones Industrial Average fell 50 points or 0.2 percent. The Standard & Poor's 500 stock index fell 0.3 percent, the fourth drop in so many days. The tech-heavy Nasdaq, shaken in recent weeks by the sell-off in the so-called FAANG stocks – Facebook, Amazon.com, Apple, Netflix and Google's Alphabet – Alphabet, dropped 0.2 percent.

All three had dropped to three-month lows in volatile morning trading.

"Politics and profit," said Sam Stovall, chief investment strategist of US equity strategy at CFRA. "Both 3M and Caterpillar seem to be spinning, showing the true impact of global tensions."

3M and Caterpillar, another benchmark, dropped sharply in the trade as companies could not predict robust forecasts for the remainder of 2018, as traders around the world warned that they would raise prices because of rising steel costs. The companies are closely tracked because they have large international sales and are considered economic crystal balls.


U.S. The markets have opened in one go at one of the busiest profit days of the year. (Brendan McDermid / Reuters)

Ed Yardeni, president of Yardeni Research, said on CNBC Tuesday morning that he has counted 62 "panic attacks" in the current bull market, including October's sell-off.

"The question is this a panic attack or more?" He said. "I think it will, too, and this will be just another [buying] opportunity."

Another factor weighing on the markets is the Federal Reserve's commitment to gradually raise interest rates, which was criticized by President Trump. Presidents in the past have favored low interest rates because they help stimulate the economy and in turn help those in the Oval Office.

Interest rate hikes have raised the ten-year US government bond to about 3.2 percent, the highest rate in years. The 10-year-old is being closely tracked because it is another indicator of the economy and the future of the stock market. Higher 10-year interest rates could prevent investors from selling shares in exchange for the less risky Treasury note.

"Here's what drives markets in the last 10 days," said Scott Wren, senior executive global equity strategist at Wells Fargo Investment Institute. "Will the Fed make a mistake, will global growth slow down, what is the revenue in 2019, we do not think global growth will slow down, we do not think the Fed will make a mistake, and we believe not that there will be a total trade war. "

US Markets were buoyed in the early morning hours by the sharp decline across Asia, wiping out a slight overseas Monday rally. Japan's Nikkei 225, China's whistling Shanghai Composite and Hong Kong's Hang Seng all fell more than 2 percent.

Europe was also in decline, the London FTSE 100 lost almost 1 percent, the German DAX 1.8 percent and the naughty CAC 40 less than 1 percent.

The markets are hit by many sides: fears that the Chinese economy is slowing down; uncertain about an upcoming US election; rising interest rates in the United States; and worried that the long bull market in the US is in its last legs.

Rising tensions between the US and Saudi Arabia, one of the world's largest oil suppliers, over the death of Washington Post columnist Jamal Khashoggi have also turned the markets upside down. Saudi Arabia's ability to dampen oil prices makes it a huge player in the global economy.

Oil prices fell on Tuesday after Saudi Arabia said it would increase production, which would keep global supply and oil demand in balance. Oil prices are based on a careful choreography between producers and consumers, with politics, economic growth, weather, accidents, terrorism and a million other factors that affect oil prices.

Nearby, Brent crude oil was down almost 3 percent to under $ 80 a barrel, a key threshold that signals sufficient supply, at least in the short term. West Texas Intermediate futures were also traded at around $ 68 a barrel.

A Saudi wave would offset the Iranian gap associated with the economic sanctions that will come into force against this country next month. President Trump retired earlier this year from the nuclear deal with Iran and eliminated Iran's supply from most oil markets.

"You look at everything – Saudi Arabia, the oil market, Brexit, Italy, the US elections, the Fed collection rates – I could go on and on," said Brad McMillan, chief investment officer for the Commonwealth Financial Network. "The question is not why the market reacts." The question is, why is not it worse? "

McMillan said he sees the market fall even more in the context of a reality check of the economy and global tensions. The previous reporting season was healthy, although some companies reported a slowdown in sales growth.

But markets suffered several setbacks, including a decline of 11 percent in late 2015 and early 2016. Then the market fell nearly 10 percent earlier this year.

"That's normal volatility, so I would not be surprised if there were more setbacks," McMillan said. "But as long as the economic fundamentals remain solid, the market usually comes back."


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