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Tech shares slump, dragging Dow down more than 550 points

By Sheetal Sukhija, Mid East News
21 Nov 2018, 06:14 GMT+10

NEW YORK, U.S. - Extending a pre-Thanksgiving rout, U.S. stocks fell sharply on Tuesday, sparked by disappointing earnings from several retailers and a selling in technology shares.

The Dow Jones Industrial Average fell nearly 500 points in early trade on Tuesday, before rebounding slightly after 10 am.In late morning trade, the Dow was still down 414.13 points or 1.7 percent before falling 2 percent later inthe day, at 24,516.

At the session's lows, the benchmark tumbled by as many as 596 points or 2.3% percent.

By the close of trading the Dow had clawed back somewhat but was still well into negative territory. The benchmark index closed down 551.80 points or 2.21 percent at 24,465.64.

The S&P 500 index fell 48.84 points, or 1.82percent to 2,641.89.

The sharp plunge on Tuesday erased the gains made this year by both the Dow and the S&P 500 to date.

Meanwhile, the tech-heavy NASDAQ Composite Index, which dropped by 119.65 points or1.7percent to 6,908.82on Tuesday, still retained a narrow gain for 2018.

However, the NASDAQ index fell to its lowest level since April on Tuesday.

On Monday, the Dow Jones Market Data showed that the large declines recorded on the day led to the Nasdaq registering its worst such start since 2000, while it led to S&P 500 and the Dows worst start to a Thanksgiving week since 2011.

The plunge on Tuesday was caused by disappointing Target earnings, along with the slump in tech companies, that have continued to tumble over the past month.

After reporting weaker-than-expected earnings for the third quarter, Target stock fell 9.5 percent.

Further, Kohl's fell 9.2 percent, L Brands dropped 14.4 percent, Macy's fell 3.7 percent and Walmart was dragged 3 percent lower.

Meanwhile, amid reports of weakened iPhone demand, Apple added to previous losses on Tuesday.

The company's shares closed 5.21percent to trade at $177.85, a loss of $9.78 per share after it announced that it would end the practice of disclosing unit sales of its iPhones.

Blaming very weak demand from China in the late summer and a stronger U.S. dollar, Goldman Sachs analysts cut their price target for Apple shares from $209 to $182.

The decline also came a day after the popular "FAANG" trade, which includes Facebook, Amazon, Apple, Netflix and Google-parent Alphabet, all closed in a bear market, dropping over 20 percent from their 52-week highs.

Facebook too was down sharply on Tuesday, largely due to the backlash it has drawn over recent revelations about its handling of the 2016 U.S. Presidential election.

Further, Boeing shares fell sharply on Tuesday following the announcement that the company was cancelling a conference call with airlines to discuss the systems on the 737 MAX model.

The U.S. dollar soared as stocks fell. The currency generally attracts buyers in risky environments. Around the New York close on Tuesday the euro had fallen to 1.1370. The British pound fell sharply to 1.2785, while the Yen inched down to 112.75.

The Swiss franc was little changed at 0.9949, while the Canadian dollar plummeted to 1.3302.

The Australian dollar was sold off as well, dropping nearly a full cent to 0.7218. The New Zealand dollar fell below the crucial 0.6800 level to trade at around 0.6790, at the close in New York on Tuesday.

Meanwhile, on Tuesday, the FTSE 100 index in London fell back, below the 7,000 point level, losing 0.76 percenton the day.

The DAX index in Frankfurt fell 1.58 percent and the CAC 40 in Paris was 1.21 percent lower.

Oil prices too tumbled through the day, with Brent crude sinking $3 to $63.77 a barrel, which was its lowest recorded level since March.

"The selloff is a continuation of the rotation away from high flying tech names and ongoing worries about the U.S.-China trade (dispute),"Nick Sargen, a senior investment advisorforFort Washington Investment Advisors said Tuesday.

Meanwhile, Craig Callahan, president at Icon Funds pointed out, "This looks like lingering worries about what triggered the October decline. That's worries about an economic slowdown. I think these people are wrong, but they're in control at this time."

Further, Hans Redeker at Morgan Stanley said, "For the U.S. equity market to stabilize, either the rest of the world will have to show better growth or the Fed will have to moderate its stance."

Meanwhile, Dario Perkins, managing director of global macro at TS Lombard wrote in a note, "Short term, unexpected weakness in the tech sector could have a significant impact on the global economy, adding to what already looks like a soggier macro environment. Additional retrenchment in the FAANGs could also undermine the broader U.S. stock market."

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