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Thomas Heath
Journalist and local business columnist, writing about entrepreneurs and businesses in the Washington metropolitan area
US markets slid on one of the busiest days of the year, following a massive sell-off and a disappointing 3M report – a major industrial company opening a window to the US economy – nervous investors fled the stock.
The Dow Jones industrial average fell more than 350 points (1.4%) on Tuesday morning. The Standard & Poor's 500-stocks index lost 1.5%, its fourth decline in as many days. The Nasdaq, which has a high technicality, which has been beaten in recent weeks as a result of the sale of shares called FAANG – Facebook, Amazon.com, Apple, Netflix and Google Alphabet Alphabet – lost 1.7% .
All three slipped to the three-month low.
[As stocks tumble, U.S. wonders: Is this economy as good as it gets?]
"Policy and benefits," said Sam Stovall, chief strategist for CFRA's US Equity Investment Strategy. "3M and Caterpillar both seem to be going around in circles and showing the true effects of global tensions."
3M and Caterpillar, another benchmark, lost more than 6% of Tuesday's pre-market trade, as companies failed to project robust prospects for the remainder of 2018. Caterpillar warned distributors around the world that it would increase its prices because of the rising cost of steel. Companies are closely monitored because they make huge international sales and are considered economic crystal balls.
US markets opened sharply lower during one of the busiest results days of the year. (Brendan Mcdermid / Reuters)
Ed Yardeni, chairman of Yardeni Research, told CNBC Tuesday morning that he had identified 62 "panic attacks" on the current bull market, including the October sale.
"The question is whether there is a panic attack or something more," he said. "I think that too will pass. It will become just another [buying] opportunity."
Another factor weighing on the markets is the Federal Reserve's commitment to gradually raise interest rates, which has prompted criticism from President Trump. Historically, presidents prefer low interest rates because they help stimulate the economy and thereby help those occupying an oval office.
The rate hikes pushed the 10-year US Treasury bond to about 3.2%, its highest rate in years. The 10-year period is closely watched as it is another indicator of the economy and the future of the stock market. Higher interest rates over 10 years could deter investors, who could sell shares in exchange for the less risky Treasury bill.
[[[[It's almost an economy "too good to be true," says Fed Chairman]
"That's what's been driving the markets for 10 days," said Scott Wren, senior global equity strategist at the Wells Fargo Investment Institute. "Will the Fed be wrong? Will global growth slow? What will be the gains in 2019? We do not believe that global growth will slow down. We do not think the Fed is going to be wrong. And we do not think there will be a total trade war. "
US markets were shaken early in the morning of the widespread decline in Asia, reversing a slight recovery on Monday abroad. The Japanese Nikkei 225, Shanghai Composite of China and Hong Kong's Hang Seng all fell by more than 2%.
Europe was also down, with the London FTSE 100 losing nearly 1%, the German DAX down 1.8% and the Frech CAC 40 a slight decline of more than 1%.
Markets are affected in several ways: fears of a slowdown in the Chinese economy; uncertainty about an upcoming US election; rising interest rates in the United States; and fears that the long US bull market is about to collapse.
[Winners and losers in the longest bull market ever]
Rising tensions between the United States and Saudi Arabia, one of the world's leading oil suppliers, to the death of Washington Post columnist Jamal Khashoggi, has also put the markets in competition. Saudi Arabia's ability to moderate oil prices makes it a major player in the global economy.
Oil prices slid Tuesday after Saudi Arabia announced an increase in production, which would maintain the balance between supply and global demand for oil. Oil prices are based on a careful choreography between producers and consumers, with politics, economic growth, weather, accidents, terrorism and a million other factors affecting oil prices.
Brent, closely followed, has fallen close to 3% to less than $ 80 a barrel, an essential threshold that indicates an abundant supply, at least in the short term. West Texas Intermeidate futures also traded at around $ 68 per barrel.
A Saudi surge would offset any Iranian deficit that accompanies the economic sanctions that will come into force next month against this country. President Trump has withdrawn from the nuclear deal with Iran earlier this year, removing Iran 's supply of most oil markets.
"You look at everything that's happening – Saudi Arabia, the oil market, Brexit, Italy, the US elections, the Fed rate hike, I could go on and on," said Brad McMillan, Chief Investment Officer of Commonwealth Financial Network. "The question is not why the market reacts. The question is why is not it worse?
McMillan said he saw the market plummet even more as part of an audit of the reality of the global economy and tensions. The earnings season has so far been healthy, although some companies have reported a slowdown in revenue growth.
However, markets have experienced several setbacks, including a decline of 11% at the end of 2015 and the beginning of 2016. They then fell by almost 10% earlier this year.
"It's normal volatility. I would not be surprised if there is more hindsight, "McMillan said. "But as long as economic fundamentals remain strong, the market is back in general."
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