A sell-off on Wall Street continued on Tuesday, amid steep declines in oil prices and losses among technology shares.
The Dow Jones Industrial Average closed down 2.2%, weighed down by Apple, which plunged nearly 5%.
The broader S&P 500 dropped 1.8%, while the tech-heavy Nasdaq index fell 1.7%, to its lowest level since February.
Meanwhile, benchmark oil prices sank nearly 7%, close to one-year lows.
Connor Campbell at Spreadex described the sell-off as a “macro-car crash, with Brexit fears, the post-Apec pre-G20 US-China trade war flare-up and the continuation of a nasty US tech sell-off resulting in absolute carnage”.
But IHS Markit’s chief economist Nariman Behravesh pointed to wider concerns about the strength of the global economy.
“Except for the US, every key economy has seen slower growth in 2018 relative to 2017, and will continue to see weak or even weaker growth during the next two years.”
He said US growth was supported by the Trump administrations tax cuts.
“This stimulus will wear off by late 2019 and early 2020, and the US economy will join the others in seeing a significant loss of speed,” he said.
What triggered Tuesday’s falls?
US retailers were punished for weak results and forecasts, with shares in Target sinking 10%, while Kohl’s tumbled 9% and Walmart was dragged 3% lower.
Analysts at Goldman Sachs cut their price target for Apple shares from $ 209 to $ 182, blaming very weak demand from China in the late summer as well as a stronger US dollar.
Michael O’Rouke at Jonestrading said retailers as well as big technology firms such as Amazon and Facebook had pushed the market higher for most of this year.
“Now that’s fading, so people are more apt to take profit and de-risk going into the year-end. There are the headwinds of the trade war out there. The fiscal stimulus from tax cuts is starting to fade … we don’t have many positive catalysts,” he said.
Global markets weren’t in much better shape.
In London, the FTSE 100 index slipped back below the 7,000 point level. The DAX index in Frankfurt fell 1.5%, while in Paris, the CAC 40 was 1.2% lower.
Analysis: Air runs out of stock market rally
By Michelle Fleury, New York business correspondent
The balloons will soon be inflated for the Thanksgiving Day parade just as the air seems to be coming out of the US markets.
Tuesday’s sell-off seemed to be sparked by disappointing earnings from several retailers.
Aside from that, Wall Street traders offered up several reasons for the recent volatility.
One was President Trump’s trade war with China. Any escalation could hurt US and Chinese companies by raising production costs and the price for consumers.
Another was the prospect that America’s central bank could raise interest rates to combat inflation and stop the economy from overheating. This makes it more expensive for companies to borrow and invest.
Whatever is behind the latest stock market gyrations, it’s worth remembering that the current bull market is the oldest in history.
For months some have warned that the US market is overvalued. In which case what you may be witnessing is a shift as investors move from chasing yield – financial jargon for the return on their investment – to managing risk.
Will the declines continue?
Since market turmoil emerged in earnest in October, all three major US indexes have largely given up the gains made earlier in 2018.
Oil prices for the major benchmarks are also down about 30% since last month.
On Tuesday, Brent crude fell by 6.5% to $ 62.58 a barrel while West Texas Intermediate shed 6.8% to $ 53.41 a barrel.
Hans Redeker at Morgan Stanley commented: “For the US equity market to stabilise, either the rest of the world will have to show better growth or the Fed will have to moderate its stance.”