RNZ, Wellington, October 12, 2018
New Zealand shares are facing a second day of hefty losses after the Wall Street dropped again overnight.
Despite the drop, Wall Street losses have been less severe than the brutal sell-off in the previous session.
The New Zealand benchmark top-50 index has fallen 82 points or nearly 1% in early trading.
Traders on the floor of the New York Stock Exchange
(Photo: AFP/Getty Images)
Fifth largest loss
The fall follows a second day of losses on Wall Street, when US share markets suffered their sharpest one day fall in months on Wednesday.
The New Zealand stock exchange followed the US and Asian markets down, with the NZX Top 50 last night closing 3.6% lower – its fifth largest loss.
The US stock market is reacting to the impact of trade tensions on corporate profits, Treasury yields at multi-year highs and, more recently, Hurricane Michael making landfall in Florida.
Energy and health stocks led the decline of nine of the S&P major sectors, while technology companies managed to post slight gains.
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The tipping point
While stocks had coped well with rising trade tensions between the US and China over the past few months, the sharp rise in bond yields earlier this month, accompanied by hawkish comments from Federal Reserve officials, proved to be a tipping point that triggered the sell-off on Wall Street.
Still, the high-growth technology sector was up 0.4%, coming off a 4.8% slide on Wednesday. Gains were led by Microsoft, up 1.9 percent.
“The growth stocks, which are the path leaders, typically bounce from the bottom first,” said Tom Plumb, portfolio manager of the Plumb Balanced Fund in Wisconsin.
Energy stocks fell 1.77% as oil prices hit two-week lows after an industry report showed US crude inventories rose more than expected.
Foreign Exchange Specialist Derek Rankin told Morning Report that it was possible traders were taking profits early amid uncertainty ahead of the US mid-term elections in three weeks.
At about midday New York time, the Dow Jones Industrial Average was down 0.54%, the S&P 500 had fallen 0.64% and the Nasdaq was 0.03% lower.
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