Wall St extends slide as rates in focus

Sinead Carew

Wall Street indexes continued their slide in a volatile session as investors worried about rising interest rates and braced for a trade war hit to corporate earnings.

In its sixth consecutive day of declines, the S&P closed down 2.1 per cent after shedding 3 per cent in Wednesday's session. At its session low, the benchmark fell 2.7 per cent to its lowest level since early July.

The Nasdaq narrowly avoided confirming a correction. During the session it fell as much as 10.3 per cent from its August 29 closing record high but ended the day 9.6 per cent below the record.

Investors worried that equity markets would have trouble recovering as rising interest rates coincide with uncertainty about how much earnings growth would be hurt by a US trade war with China.

"People fear that it will be harder to snap back if we're seeing a cyclical top in earnings with those two headwinds, which are not going away," said Michael O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

The Dow Jones Industrial Average fell 545.91 points, or 2.13 per cent, to 25,052.83, the S&P 500 lost 57.31 points, or 2.06 per cent, to 2,728.37 and the Nasdaq Composite dropped 92.99 points, or 1.25 per cent, to 7,329.06.

After hitting an intraday high of 28.84, the CBOE Volatility Index, popularly known as the "fear gauge," ended the day up 2 points at 24.98, its highest close since February 12.

"We saw a rally this morning, and that ended up being a suckers' rally. Then you had buy-the-dippers coming in here saying this was too much too fast," said Dennis Dick, proprietary trader at Bright Trading In Las Vegas.

"Are we out of the woods here? I don't think so," he said. "You're going to see a lot of volatility in the next week or so."

The energy sector, pressured by a drop in oil prices, was the lead decliner, while insurers were some of the biggest losers in the financial sector a day after powerful Hurricane Michael slammed into Florida.

The S&P's 11 major sectors all ended the day in the red with only the communications services sector managing a decline of less than one per cent.

Energy was the biggest loser with a 3.1 per cent drop as oil prices hit two-week lows following an industry report showed a bigger-than-expected build in US crude inventories.

The financial sector fell 2.9 per cent, also hurt by a 2.7 per cent drop in bank stocks a day before three of the biggest banks were to report quarterly results.

Wall Street expects S&P 500 companies to report third-quarter earnings growth of 21.3 per cent for the third quarter.

The technology sector, the biggest loser in Wednesday's sell-off, closed down 1.3 per cent on Thursday.

Stocks had seen some support earlier in the session from US data showing a smaller-than-anticipated rise in consumer prices as it helped ease fears of increasing inflation pressures.

The data helped push US Treasury yields to a one-week low, further soothing equity investors.

But investors still faced a sea of worries, including uncertainty ahead of US midterm congressional elections on November 6, and hawkish comments last week from US Federal Reserve officials.

Volume on US exchanges was 11.44 billion shares, its highest level since February and compared with the 7.65 billion-share average for the full session over the last 20 trading days.