Last Updated Oct 24, 2018 5:33 PM EDT
U.S. stocks fell sharply Wednesday, with the Dow shedding more than 600 points in the session to close down 2.4 percent.
The tech-heavy Nasdaq fell more than 4 percentage points, closing at 7,108.40 and leaving it in correction territory — down 10 percent from its last high. The Dow and S&P 500 erased their gains for the year, Bloomberg reported.
Behind the slump is a broad-based sell-off among tech and media companies. AT&T sank after reporting weak subscriber numbers, and chipmaker Texas Instruments fell sharply after reporting slumping demand. Amazon and Alphabet, both scheduled to report earnings on Thursday, fell by more than 5 percent each.
Panic selling
Disappointing quarterly results and forward outlooks weighed on the market, stoking investors’ jitters over future growth in corporate profits.
“For most of the current decline, investors have been too quick to signal a bottom, but that appears to have changed today with panic-like selling in most of the heretofore strong groups and sectors,” Bruce Bittles, chief investment strategist with Baird, said in a note.
About 24 percent of the companies in the S&P 500 had reported third-quarter results as of Wednesday. Of those, 57 percent delivered earnings and revenue results that topped Wall Street’s forecasts.
Even so, traders are concerned about where economic growth is heading amid rising inflation, interest rates and uncertainty over trade. Some companies, including Caterpillar and 3M, have reported disappointing results and warned of rising costs related to tariffs in the U.S.-China trade dispute.
Interest rate, trade concerns
Investors are starting to fret about slowing growth in both the U.S. and China, the world’s two largest economies, according to Capital Economics. Although the Commerce Department is expected to report on Friday that U.S. GDP product grew at a healthy clip between July and October, economists now forecast that quarterly growth will slip below 3 percent in the fourth quarter and into 2019.
Rising borrowing costs are also weighing on growth. The Federal Reserve in September raised short-term interest rates for the third time this year, and most forecasters predict a fourth hike in December. The most recent increase was the eighth hike since the central bank started lifting its benchmark lending rate in late 2015.
“We think that the S&P 500, Treasury yields and the US dollar will all fall by the end of next year, as a sharp slowdown in the U.S. economy prompts the Fed to stop hiking rates sooner than investors are anticipating,” researchers at Capital Economics said in a research note. “Indeed, we think that China’s economy will lose more momentum, and expect the US-China trade war to rumble on.”
— The Associated Press contributed reporting
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