Stocks fell sharply on Wednesday as growing Wall Street pessimism pulled two major U. S. indexes in negative territory for 2018. The Dow Jones Industrial…
Stocks fell sharply on Wednesday as growing Wall Street pessimism pulled two major U. S. indexes in negative territory for 2018.
The Dow Jones Industrial Average lost 608 points Wednesday, a 2.4 percent drop that wiped out the index’s gains on the year. Standard and Poor’s 500 index fell 3.1 percent, also sliding below its 2018 open.
The Nasdaq composite tanked 4.1 percent as a Silicon Valley sell-off brings the tech-heavy index deeper into a formal correction.
U. S. stocks have slid throughout October as traders brace for higher interest rates, deepening trade tensions and moderating corporate earnings to slow the economy.
This month, the Dow has dropped 7.1 percent, the S&P 500 has fallen 8.9 percent and Nasdaq has tumbled 11.7 percent, according to CNBC. A formal correction is considered a 10 percent drop from a stock or index’s most recent peak.
The October sell-off is the second major market downturn of 2018 and comes two weeks before the midterm election. Unemployment remains close to record lows but the fading stock market could hamper Republican efforts to maintain control of Congress by touting the strong economy.
U. S. stocks exploded in value since President Trump ’s 2016 election and still remain close to historic highs despite a volatile 2018. But Trump, who frequently took credit for the rampant bull market, has raged in response to the recent downturn and blamed the Federal Reserve for spurring the correction.
Trump has blasted the Fed and its chairman, Jerome Powell, for raising interest rates despite widespread support within the central bank and among Republicans to do so. The president has insisted that the “ridiculous” rate hikes are unnecessary and would choke off economic growth.
“To me the Fed is the biggest risk, because I think interest rates are being raised too quickly,” Trump told The Wall Street Journal in a Tuesday interview. “How the hell do you compete with that?”
“Every time we do something great, he raises the interest rates,” Trump said, referring to Powell.
The Fed has raised interest rates eights times since 2015, six times since Trump took office and three times since Powell took over as chairman in February. The Fed’s current baseline is set at 2-2.25 percent, and the bank is expected to increase it by 0.25 percentage points in December.
Investors have fled stocks partly because of rising interest rates, which raise borrowing costs and reduce profit margins.
The rising costs of Trump’s trade war and gloomier projections for global growth have also spurred much of the sell-off, according to analysts. Several corporations reported higher input costs and lower expected profits due to tariffs.
