By Amrith Ramkumar
A powerful slump in technology and internet stocks accelerated
Friday, putting the S&P 500 in danger of joining the Nasdaq
Composite in correction territory as investors continued an October
retreat from risky assets.
The S&P 500 dropped 0.8% to 2682.91, after earlier falling
nearly 3% and breaching the 2637.68 level that would put it 10%
below its last record. That would put it in correction territory
for the first time since February's selloff.
The Nasdaq Composite slumped 0.9%, paring much of Thursday's
rebound and putting it down about 11% for the month, while the Dow
Jones Industrial Average fell 0.6% to 24841. A close below 24145.55
would put the blue-chip index in correction territory.
Markets around the world have been caught up in a whirlwind week
marked by vicious intraday drops and sharp rebounds. Worries about
corporate revenue slowing and whether a slowdown in China and
Europe growth could spill over into the U.S. economy have sent U.S.
stocks into a tailspin, putting major indexes on course for their
worst month in several years.
Fast-growing internet and tech firms have been some of the
hardest hit during the turmoil of the past few weeks, leading some
analysts to wonder whether companies that had previously seemed
immune to the global growth fears rocking other markets can
continue surging ahead.
Quarterly sales from Amazon.com and Google parent Alphabet
disappointed investors, sending the two tech behemoths' stocks
sharply lower Friday and pushing prices of everything from retail
stocks to copper prices lower. This week's selloff has been
characterized by widespread buying and selling, leading to whipsaw
trading that has jolted many investors.
"Once you start seeing a slowdown in revenue, it makes sense
that those stocks could fall, but what's been upsetting is you see
everything coming down," said Craig Hodges, portfolio manager for
Hodges Funds. "I'm really amazed at some of the prices I see."
Mr. Hodges said he has been buying shares of materials and home
builders that have also been engulfed by this week's selling and
among the market's worst performers this year.
Shares of Amazon slumped 6.7% to enter a bear
market--characterized by a decline of at least 20% from a recent
high--while Alphabet fell 0.3%, recovering most of its earlier
losses. Facebook, Netflix and Apple also fell. With Amazon's slump,
the e-commerce company's market value fell to roughly $800 billion,
putting it behind Microsoft as the second-largest U.S. company
behind Apple.
After Amazon hit a $1 trillion market cap early last month, some
analysts had anticipated it would soon overtake Apple as the
world's largest publicly traded company. But investors have said
weaker-than-expected revenue has stoked fears about softening
global demand.
This month's selloff in the so-called FANG stocks -- Facebook,
Amazon, Netflix and Google parent Alphabet -- has taken more than
$300 billion off the group's market value, according to Dow Jones
Market Data. The Nasdaq Composite had lost more than $1 trillion
this month through Thursday.
In addition to Amazon and Alphabet, lackluster sales and
forecasts from executives at a wide swath of companies earlier this
week swung stocks. Weak reports from Caterpillar and 3M battered
major indexes Tuesday, while poor sales targets from chip maker
Texas Instruments hurt not only that company but the semiconductor
group.
The trend of pockets of weakness widening to engulf entire
sectors and the wider market has some analysts predicting more
turbulence ahead as reports of weaker-than-expected consumption and
higher input costs have surprised some investors.
"It has brought people to wonder, 'Are these fantastic
fundamentals fading?'" Jim Paulsen, chief investment strategist at
Leuthold Group, who has recommended this year reducing stock
positions and buying beaten-down commodities and emerging market
assets. Mr. Paulsen predicts U.S. stocks will fall further in the
coming weeks.
Data Friday showed strong consumer and government spending
powered a 3.5% increase in U.S. gross domestic product in the third
quarter, although a warning sign about the outlook emerged in the
form of weak business investment. Tepid housing and auto sales also
continue to hang over corners of the market.
Just 28% of individuals think stocks will be higher six months
from now, down 6 percentage points from last week and the lowest
level since the start of July, according to the American
Association of Individual Investors. Meanwhile, 41% of individuals
say they think stocks will be lower six months from now -- a jump
from last week and far above the historical average of 31%.
Weakness in the U.S. has continued to spill over to markets
around the globe, many of which had already been pummeled by
economic fears earlier in the year.
The Stoxx Europe 600 fell 0.8% Friday and is down 8% for the
month, while commodities such as copper used widely in
manufacturing and construction also continued to drop.
Investors also continued to scoop up safer assets, pushing gold
prices up 0.6%. The yield on the benchmark 10-year U.S. Treasury
note edged down to 3.083%, according to Tradeweb, from 3.119%.
Yields fall as bond prices rise.
Some investors' anxieties have reached a fevered pitch, as the
swiftness of this week's pullback, along with the breadth of the
tech and growth companies caught up in it, has rekindled fears of
the 2008 financial crisis and the dot-com bubble in 2000.
"There are the less rational, significantly more emotional"
investors, said Hugh Johnson, chairman of Hugh Johnson Advisors
LLC, a wealth-management firm in Albany, N.Y., who added that more
of his clients have been pushing to sell stocks than buy. "They
simply want to reduce equities period. They worry about a
repeat."
Michael Wursthorn contributed to this article.
Write to Amrith Ramkumar at amrith.ramkumar@wsj.com
(END) Dow Jones Newswires
October 26, 2018 13:36 ET (17:36 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Netflix (NASDAQ:NFLX)
Historical Stock Chart
From Aug 2024 to Sep 2024
Netflix (NASDAQ:NFLX)
Historical Stock Chart
From Sep 2023 to Sep 2024