The Dow had its third worst point decline in history on Wednesday, plunging nearly 832.
The index fell below 26,000 points for the first time in a month. All 30 Dow stocks were in the red. The plunge represents a 3% dip in the index.
Tech stocks got hit particularly very hard. The S&P 500 and Nasdaq both declined 3.3% and 4% respectively. The decline is the worst for Nasdaq since 2016.
International markets followed the downward trend. The Nikkei was down more than 3% in morning trading Thursday.
The somber October for stocks is mostly due to investor fears over rising interest rates, experts believe.
October has often been a nerve-racking month for investors, and this month is living up to that reputation. All three indexes are in the red this month. But the Nasdaq has really taken it on the chin: It has plunged nearly 8% already in October.
The Dow’s point decline was the worst since February, when the index fell by more than 1,000 — twice. The Dow’s percentage decline doesn’t crack the top percentage declines. The index fell 23% in 1914 and on “Black Monday” in 1987.
The Technology Select Sector SPDR Fund, a proxy for the tech sector, plunged 4.85%. That hadn’t happened since August 2011.
Why Stocks are Plunging
Tech is taking its lumps because bond yields have climbed in recent weeks, hovering at a more-than-seven-year high. This is partly because the strong US economy is quite strong.
Higher long-term rates could slow down red-hot sectors of the economy, including technology, especially as the Federal Reserve seems intent on raising short-term rates for the foreseeable future. Higher rates increase borrowing costs, pinching corporate profits.
Investors may want to shift out of momentum and into more defensive stocks — companies that aren’t as expensive and also pay healthy, stable dividends.
Continued worries about a slowdown in China’s economy — especially as trade tension with the United States has escalated — were also dragging down the broader market.
Who’s up and who’s down
As already observed, Tech companies did badly while food companies like Smucker (SJM) and General Mills (GIS), Gold Miner Newmont (Nem) and bargain retailers Dollar General (DG) and Dollar Tree (DLTR) finished the day higher.
But there were few places to hide Wednesday. Only 17 stocks in the S&P 500 wound up with again. Even utility stocks, which tend to pay big dividends, fell slightly Wednesday.
Apple (AAPL), Boeing (BA), Caterpillar (CAT) and Nike (NKE) — Dow stocks that all have a significant presence in China — were among the bigger blue-chip losers on Wednesday.
Volatility has returned with a vengeance. The CBOE Volatility Index, or VIX, a market barometer often dubbed Wall Street’s fear gauge, surged nearly 40%.