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The Dow fell more than 800 points Wednesday, its worst fall in eight months. Rising bond yields drove investors out of the stock market. The best performing stocks of the past year have suffered the largest losses. (October 10)
AP
epa07086828 A table shows the industrial Dow Jones average on the New York Stock Exchange in New York, United States, on October 11, 2018. The Dow Jones Industrial Average has lost nearly 550 points today. EPA-EFE / JUSTIN LANE XMIT ORG: JLX21(Photo: JUSTIN LANE, EPA-EFE)
Damage assessments resulting from the recent market crisis are happening and stock losses are more macabre and larger than they are on the surface.
The fall of many individual stocks was much larger than the 7% drop in the overall stock market, which was confusing but manageable, compared to the peak of the end of September, according to the data.
Big time problems for the struggling bull market are hiding in the deeper pool of companies that make up the Standard & Poor's 500 stock index. Most of their stock is down, with 165 companies, one-third of the index, currently in bearish territory.
That means their stock prices have fallen more than 20% from their recent highs, according to Bloomberg data released Friday morning.
In dollars, investors suffered a $ 2.5 trillion paper loss on US stocks after reaching a market record from September 20 to Thursday, according to Wilshire Associates.
"The beginning of the fourth quarter was very difficult," said Thomas Lee, managing partner of Fundstrat Global Advisors, a New York-based investment firm.
A confusion of factors frightens investors: fears of a rise in interest rates; trade tensions with China; and the feeling that solid profits and the good economy can only worsen, not improve.
"We've just lost 1,400 Dow points in two days, but the average stock is much worse," said Gary Kaltbaum, president of Kaltbaum Capital Management. "That tells you how much there has been real weakness."
Among companies in the S & P 500, the shares of Newell Brands, maker of Sharpie markers, Coleman coolers and Rawlings baseball gloves, fell by 59%, their most recent record.
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Many of the other big losers are stocks that are sensitive to rising interest rates or the impact of tariffs. Still others are very promising former players who were the first candidates for investors to withdraw their money when the market plummeted.
Here's a look at the dead:
Stocks suffer by increasing borrowing costs
Residential construction companies are a part of the market weighed down by rising interest rates. The shares of Lennar and the Pulte Group are respectively down 40% and 34% from their recent highs. Their homebuyers will be paying more now that mortgages have higher interest rates. The 30-year fixed-rate mortgage rate – the most popular home mortgage for purchases – has recently surpassed 5% for the first time since the beginning of 2011. This is making it difficult for people already facing high prices and low prices. Low stocks afford a home.
Analysts are worried that automakers such as Ford Motor, whose stock is down nearly 35% from its current highest level, and General Motors, down more than 30%, are also suffering from a lack of fuel. a decline in sales due to the rising costs of financing new and used cars.
The activities of both companies were also affected by the rising cost of commodities, mainly because of President Trump's 25% tariff on imported steel. In July, GM announced a $ 300 million increase in commodity costs in the second quarter. Similarly, Ford said the rates have increased costs by $ 145 million and could reach up to $ 600 million for the entire year.
Actions modified by tariffs
It's not just the car companies that are suffering from the tariffs. Home appliance maker Whirlpool, whose shares are down 44% from its recent peak, has revised down its earnings outlook for the year in July. The darkest forecasts were based in part on a $ 200 million increase in the cost of raw materials due to the 25% import duties on steel and 10% on aluminum. .
Harley-Davidson shares are down more than 27%. In June, the iconic motorcycle builder announced additional costs ranging from $ 45 million to $ 55 million this year due to trade disputes.
The darlings of the market abandoned by their followers
Popular technology stocks also fell sharply. Investors are getting rid of these once very promising stocks to try to make profits and flee to parts of the market that they think will resist better in the event of a recession.
Twitter's shares are down more than 43% from their last high, Facebook by almost 30% and the Netflix video streaming service by 24%. Twitter and Facebook stock prices, which federal lawmakers recently analyzed senior executives about user privacy issues and foreign manipulation of the US election, have also come under pressure to fear future government regulation.
"It's not surprising to see a rotation between hot names and less aggressive stocks," said Amanda Agati, chief investment strategist at PNC Financial Services Group.
Bear Market is a scary term for Wall Street and investors. What does it mean? And how does it affect Wall Street and Main Street? Adam Shell explains.
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