U.S. stocks slid sharply Wednesday as investors sought safe havens from rising interest rates and the feared reversal of years of consistent gains for technology companies.
The Dow Jones Industrial Average dropped 831 points Wednesday afternoon, losing 3.2 percent on the day. The Nasdaq composite fell 4 percent and the S&P 500 lost 3.3 percent as U.S. stocks took their worse daily losses since February. The Dow’s Wednesday skid was its third-worst daily loss by points.
{mosads}Stocks in tech companies that led the bull market of the past decade suffered the heaviest losses as investors pull back from the sector. Shares of Amazon, Netflix, Facebook, Apple and Twitter all fell sharply throughout the day.
Tech companies had boasted some of the best performing stocks of the recent surge and wooed billions of dollars from investors drawn to booming Silicon Valley titans. But a rash of security breaches, hacks, scandals and federal oversight have made the sector less attractive to traders.
Investors have also been shaken by rising interest rates and bond yields triggered in part by recent Federal Reserve rate hikes. Higher borrowing costs typically narrow corporate profit margins and dampen investment, pushing traders toward Treasuries and other products seen as safe havens.
The Fed has raised interest rates eight times since 2015, six times since President Trump took office, and is expected to do so again in December. The central bank most recently raised rates in September, increasing the Fed’s baseline interest rate range for the third time in 2018.
Inflation has continued to rise toward the Fed’s 2 percent annual target, and central bank officials say the strong economy warrants tighter financial conditions.
The likelihood of further Fed rate hikes has spurred an October sell-off in U.S. markets after a relatively calm September. The S&P 500 and the Dow have dropped 2.7 percent and 1.6 percent, respectively in October, according to CNBC, while the Nasdaq, meanwhile, has lost more than 5.5 percent.
Despite a brutal October, stocks are still close to record highs reached earlier this year and do not appear to be headed toward a massive downturn. But a prolonged correction reaching into November could damper the Republican Party’s emphasis on the growing economy ahead of the midterm elections.
Trump on Tuesday urged the Fed to slow down its campaign to raise interest rates and let the economy grow unimpeded. The Fed is seeking to raise interest rates quickly enough to stave off rampant inflation but gradually enough to let the recovery from the 2008 recession reach full potential.
Updated at 4:33 p.m.