U.S. stocks lurched lower Monday, deepening a fall rout that has shaken many investors’ confidence in the technology titans that had led the bull market higher for much of the past year.
The Dow Jones Industrial Average slid 455 points, or 1.8%, to 25392. The S&P 500 fell 1.8%, and the tech-heavy Nasdaq Composite lost 2.8%.
Monday’s stock declines were accompanied by a broad retreat from risk across financial markets. Bitcoin prices at one point crashed below $5,000 for the first time this year, while Brent crude and copper, two barometers for global growth, retreated.
As the selling accelerated, investors flocked to assets that tend to do well during volatile stretches of trading. Treasurys strengthened, and the Japanese yen and the Swiss franc rose against the U.S. dollar.
The drawdown was the latest setback for the stock market, which has suffered a series of punishing pullbacks this fall as investors have backed off from many of the technology companies that had powered major indexes’ gains earlier in the year. Downbeat forecasts from companies such as Apple and Facebook have intensified questions over whether the past year’s gains can be justified.
Now, investors are grappling with whether the stock market can keep climbing without the support of former market leaders in the technology and communications-services sectors. That is especially true with investors already expecting a broader slowdown in corporate earnings growth as rising rates and a stronger dollar take a greater toll on profits.
Earnings for companies in the S&P 500 look set to grow 26% in the third quartet — the fastest pace since 2010. But analysts expect that pace to slow to the single digits next year, in part as windfalls from the tax overhaul passed late last year fade.
“When you lose leadership in the market, people start wondering if that’s indicative of the whole market,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management.
Apple, which reported record revenue and profit for the latest quarter but delivered a revenue outlook that disappointed investors, slid 3.4% Monday, at its lowest point looking on course to end the day in bear market territory: a drop of at least 20% from a recent high. The stock’s retreat is the latest sign to investors that even companies that had produced expectations-defying growth in past quarters are vulnerable to sharp reversals.
Companies that supply components and parts for Apple like Lumentum and Qorvo also came under pressure, hurt by signs of lower-than-expected demand for new iPhones.
The rout spread beyond Apple, taking semiconductor firm Advanced Micro Devices, Netflix, Facebook and Amazon.com down more than 3% apiece. All of those stocks had rallied earlier in the year, buoyed by bets among investors that technology-driven companies would be able to deliver robust growth.
As the declines spread, traders prepared for more swings ahead. The Cboe Volatility Index, which measures expectations for stock swings, jumped 12% to 20.39.
Outside the U.S., the Stoxx Europe 600 declined 0.7% to end at its fifth lowest level of the year. Shares of French car maker Renault cut into broader gains in the region following reports that its chief executive, Carlos Ghosn, was arrested in Japan.
Investors say there is likely to be continued wariness as U.K. Prime Minister Theresa May fights to save her Brexit deal ahead of a Nov. 25 summit.
In the U.K., “there’s so much uncertainty for companies going forward — they can’t invest and it’s holding back growth” said Nicole Kornitzer, portfolio manager at Buffalo International Fund. “Hopefully after the next parliamentary vote in the U.K., the situation regarding Brexit will become more clear and that could be a reason to be more optimistic” about U.K. and European stocks, she said.
Asian markets rallied despite lingering trade tensions between the U.S. and China at the Asia-Pacific Economic Cooperation summit. The economic summit of world leaders ended Sunday without issuing a communique for the first time in its nearly three-decade history amid a fight over Chinese trade practices.
“China is the main reason we’ve been reducing risk in the near-term,” said Hani Redha, a portfolio manager at PineBridge Investments, noting he has seen signs of an economic slowdown there in consumption indicators and household and corporate surveys.
Hong Kong’s Hang Seng added 0.7% and the Shanghai Composite Index rose 0.9% as Chinese property companies climbed, while Japan’s Nikkei Stock Average rose 0.6%.
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