The Dow Jones industrial average dove more than 600 points Wednesday as another wave of volatility swept through U.S. financial markets.
The blue-chip index bobbed in the red most of the session, dragged down by a weak housing report and a beleaguered technology sector.
The tech-heavy Nasdaq took the steepest losses of the day, down 4.4 percent to 7,108.40. It's now in correction territory, down 11.4 percent from its September 2018 high, according to Bespoke Investment Group.
The Dow's drop was a sharp reversal from its upward momentum as trading opened coming off a strong earnings report from aircraft maker Boeing. By day's end, it had wiped out all of its 2018 gains, falling 608 points, or 2.4 percent, to close at 24,583.42. The Dow is looking at its worst month in eight years.
The Standard & Poor's 500 index was off 3 percent Wednesday, closing at 2,656.10.
The Russell 2000 index of smaller-company stocks gave up 57.89 points, or 3.8 percent, to 1,468.70, and is down 4.4 percent for the year.
The markets are in the midst of one of the busiest earnings weeks of the year, with major blue chips including Microsoft, Visa, Tesla, UPS and Ford all reporting Wednesday.
Nancy Tengler, chief investment officer for Heartland Financial USA, said several things are at work driving down prices, one of which is the lack of buyers jumping into the market to scoop up deals on stocks.
Some of those buyers are the companies themselves.
"You have all these buybacks, but right now is a blackout period, so these great companies and insiders can't buy their own shares," Tengler said. "There's no offsetting buyer. So when the algorithms drive the sell programs, it feeds on itself. The same thing happened when the market dropped in January."
"After the elections, the buybacks will be allowed and kick in," she said. "We will see a bounce between then and the end of the year."
"This could be a bull market correction or something more serious," said Michael Farr, an investment manager in Washington. "This drop is coming out of technology."
Some Wall Street experts said the steep sell-off in the last hour of trading was a scramble by sellers who are looking beyond this year and toward more modest earnings in 2019 -- in the neighborhood of 5 percent growth instead of 20 percent.
They are also unnerved at the slowdown in the Chinese economy, the strong U.S. dollar and other global menaces such as a looming Italian financial crisis, U.S. tensions with Saudi Arabia and the latest domestic crisis involving a series of homemade bombs sent this week to former President Barack Obama, former Secretary of State Hillary Clinton, CNN and others.
Investors are closely watching other signals, too, including new inflationary concerns over tariffs and the Federal Reserve's interest-rate increases, which are coming under heavy criticism from President Donald Trump.
"One loyal follower of our research suggested that perhaps the market is spooked about the mixed-up mix of U.S. fiscal, monetary, trade, and foreign policies," according to Ed Yardeni, president of Yardeni Research. "I've recently been describing them as akin to driving a car with one foot pushing hard on the accelerator while the other is tapping on the brakes."
"Investors are on pins and needles," said Erik Davidson, chief investment officer at Wells Fargo Private Bank. "There has definitely been a change in sentiment for investors starting with the volatility we had last week. The sentiment and the outlook seems to be turning more negative, or at the very least, less rosy."
Investors have grown concerned in recent weeks that corporate America's tax-cut-fueled earnings growth this year will be arrested in coming months amid rising inflation, uncertainty over the escalating trade conflict between the U.S. and China and the likelihood of higher interest rates. Recent data showing the housing market is slowing also have fueled speculation that U.S. economic growth will start to slow next year.
The outlooks from some of the companies that reported third-quarter results this week, including Caterpillar, 3M and UPS, only stoked those worries.
"You've seen more discouraging [company] commentary this quarter than you have the last two," said Tom Martin, senior portfolio manager with Globalt Investments. "You're really starting to get more of a groundswell of caution. There's some concern about the fourth quarter and what that's going to look like."
The sell-off in tech capped a horrendous month for Silicon Valley, with painful losses in share value on Wednesday. Netflix lost 9.4 percent. Facebook lost 5.4 percent. Amazon lost 6 percent. Apple lost 3.4 percent.
Dow member AT&T fell short of third-quarter profit expectations Wednesday, which pushed its share price down nearly 7 percent and added to worries about the tech sector. The semiconductor industry also has shown weakness. The losses fueled fears that the sector that has powered the current bull market is played out.
The energy sector was also a heavy drag, dropping 3.8 percent on the day. Energy is the poorest performing sector in the past five sessions, down 8.6 percent.
Shares in iRobot plunged 12.3 percent to $80.49 after the robotics technology company said tariffs will reduce its profitability in the fourth quarter.
Texas Instruments fell 8.2 percent to $92.01 after the chipmaker delivered quarterly results that fell short of Wall Street's forecasts, noting that demand across most markets is slowing.
Boeing was one of the few gainers Wednesday. It rose 1.3 percent to $354.65 after the defense contractor's latest quarterly results topped analysts' forecasts. The company also raised its estimates for the year, citing faster orders for aircraft.
Bond prices rose, sending the yield on the 10-year Treasury note down to 3.12 percent from 3.16 percent late Tuesday. The slide in bond yields came as traders sought out lower-risk assets.
Benchmark U.S. crude edged up 0.6 percent to settle at $66.82 a barrel in New York. Brent crude, used to price international oils, slid 0.4 percent to $76.17 a barrel in London.
Heating oil was little changed at $2.25 a gallon. Wholesale gasoline slipped 0.8 percent to $1.82 a gallon. Natural gas declined 1.4 percent to $3.17 per 1,000 cubic feet.
The dollar weakened to 112.44 yen from 112.47 yen Tuesday. The euro fell to $1.1387 from $1.1467.
Gold fell 0.5 percent to $1,231.10 an ounce. Silver dropped 0.8 percent to $14.68 an ounce. Copper was little changed at $2.76 a pound.
A weakening Chinese economy combined with the coming U.S. election cast an air of uncertainty over markets.
The market's shakiness comes despite the fact that many companies have beaten earnings forecasts this quarter. But the projected earnings growth has slowed in big blue chips like 3M and Caterpillar, whose outlook for modest expectations through the end of the year rattled the markets Tuesday. The Dow dropped nearly 500 points Tuesday before climbing back in the afternoon. It closed down more than 100 points.
"Right now markets are still trying to reprice," said Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance. "What's happening with earnings is exaggerating market moves."
There's another possibility for the pullback, said Brad McMillan, chief investment officer for Commonwealth Financial Network.
"Now we are starting to get into an area that suggests confidence itself in the market may be the reason," he said.
Information for this article was contributed by Thomas Heath of The Washington Post; by Alex Veiga of The Associated Press; and by Vildana Hajric and Sarah Ponczek of Bloomberg News.
A Section on 10/25/2018