Here’s why stocks are tumbling in early trading Wednesday



This is how some stocks were moving in mid-morning trading Wednesday, Feb. 14, 2018.

The Dow Jones Industrial Average lost 532 points as it headed for its worst day since February 2016 on worries over rising bond yields.

The S&P 500 and Nasdaq Composite were down by 1.5 percent.

At mid-morning, the Dow stood at 24,190.49, down 532.34. The S&P 500 was off 1.37 percent to 2,619.60. And the Nasdaq was down 2.8 percent to 6,929.15.

The sudden sell-off in global markets on Tuesday came as a surprise to few, given the indices’ record run and mounting concerns that the yield on the 10-year Treasury was rising too fast.

In Wednesday’s early morning session, though, it appears as if the concern over equities was focused on the U.S. bond market rather than emerging-market assets.

Most investors appear to be picking up shares of blue chips such as International Business Machines, which bounced back 2.2 percent to $159.14, and Exxon Mobil, which gained 1.6 percent to $79.21. Those are the only few stocks in the S&P 500 to post gains so far.

GLOBAL MARKETS IN EARLY TRADING Wednesday, Feb. 14: Stocks slumped around the world and the German government sold a third of its planned bonds to fund the country’s current accounts. The plunge took some pressure off the euro as European markets opened. Oil also fell and the British pound was steady against the dollar.

The benchmark 10-year Treasury yield was at 2.88 percent, up 1.7 basis points on the day. The yield has risen more than 20 basis points since early January. A basis point is 0.01 percentage point.

Markets were watching the outcome of the European Central Bank’s meeting this morning and the future of monetary policy.

European Central Bank officials told the Wall Street Journal in an interview that they are unlikely to change policy at the moment.

“At this point, nothing would provoke the change,” one ECB source told the WSJ.

Other central banks appeared unfazed by the spike in U.S. bond yields over the past few weeks, but ECB President Mario Draghi may give his assessment later this afternoon.

STOCKS: The Dow plunged as much as 1,175 points at the open before paring some losses by mid-morning.

The Nasdaq Composite fell 2.2 percent. The Russell 2000, a gauge of small-cap stocks, dropped 2.5 percent. The broader S&P 500 was down 1.3 percent.

Meanwhile, shares of some companies with high U.S. exposure fell. BHP Billiton was down 3.2 percent, while Coca-Cola was off by 2.8 percent.

BOND YIELDS: Yields were falling on short-dated U.S. Treasury bonds, the least sensitive to interest rate increases, as investors sought a safe haven during the stock sell-off.

The yield on the short-dated two-year note fell nearly 5 basis points to 1.43 percent. The yields on shorter-dated Treasury securities typically rise when interest rates rise.

The yield on the benchmark 10-year Treasury note was at 2.88 percent, up 1.7 basis points on the day. The yield has risen more than 20 basis points since early January.

OIL: Brent crude oil was off 0.9 percent at $64.74 a barrel in early Wednesday trading. The U.S. benchmark, West Texas Intermediate, dropped 1.5 percent to $57.29 a barrel.

China added record amounts of fuel to its stockpiles in January, though crude imports into the world’s largest energy consumer fell.

OIL INVENTORIES: American oil companies have sharply cut their forecast for future production as rising output in OPEC’s spare capacity weighs on their ability to maintain output. The American Energy Information Administration reported that U.S. crude inventories dropped by 1.1 million barrels in the week ended Feb. 9, but the American Petroleum Institute earlier reported a 2.3 million-barrel decline.

(This story was first published at 7:20 a.m. EDT. It has been updated.)

(c) 2018, The Washington Post.

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