Dow slides more than 500 points as market selloff resumes

FAN Editor

Last Updated Oct 23, 2018 12:09 PM EDT

NEW YORK – Stocks slid Tuesday, with investors pulling back amid signs that corporate profits are cresting and potential threats to global economic growth. The Dow sank more than 500 points, or nearly 2 percent, in early trade, while the S&P 500 and Nasdaq also slumped. 

By noon stocks had recovered slightly, with the blue-chip index off roughly 400 points.

Markets in Asia and Europe also fell. Traders are weighing the risks of Italy’s debt problems, with the euro sinking ahead of a European Commission meeting to assess the country’s budget plans. 

Also in focus is the ongoing controversy over the killing of journalist Jamal Kashoggi, with investors assessing the impact on global oil prices and on relations between the U.S. and Saudi Arabia.

Some Wall Street analysts think crude prices are unlikely to surge despite the pressure on the U.S. to punish Saudi Arabia, a major oil exporter, over Khashoggi’s alleged murder.

“Given the mutual dependence of the two nations, we do not expect a serious escalation that would disrupt oil supplies,” Mark Haefele, chief investment officer with UBS Global Wealth Management, said in a note. “But even if the dispute blows over, we see reasons for oil prices to remain firm.”

More broadly, financial markets around the globe and in the U.S. are reacting to a move by major central banks to raise interest rates and to concerns about what many fear could be a prolonged trade fight between the U.S. and China. 

Slowdown ahead?

Investors are starting to fret about slowing growth in the U.S. and China, the world’s two largest economies, according to Capital Economics. Although the Commerce Department is expected on Friday to report that U.S. gross domestic product grew at a healthy clip between July and October, economists forecast that quarterly growth will slip below 3 percent in the fourth quarter and into 2019.

One key factor weighing on domestic growth: rising borrowing costs. The Federal Reserve in September raised short-term interest rates for the third time this year, with most forecasters predicting a fourth hike in December. It was the eighth hike since the central bank started lifting its benchmark lending rate in late 2015.

With a host of U.S. companies preparing to report their earnings, Caterpillar shares fell nearly 10 percent as it lowered its guidance and said that higher tariffs on U.S. steel imports are raising costs. 

Technology and bank stocks led the decline, with industrial, transportation and utilities also losing ground.

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