CORRECTED-US STOCKS-S&P tumbles as investors shun risk

Reuters

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 (In Oct 10 item, corrects reference to QMA a division of PGIM,
the asset management branch of Prudential Financial)
    * Indexes fall: Dow 3.15 pct, S&P 3.29 pct, Nasdaq 4.08 pct
    * U.S. Treasury debt yields soar, global growth woes weigh

    By Sinéad Carew
    NEW YORK, Oct 10 (Reuters) - U.S. stocks tumbled on
Wednesday, with the S&P 500 and the Dow marking their biggest
daily declines since Feb. 8, and technology stocks were at the
center of the carnage as rising U.S. Treasury yields sent
investors fleeing from risky assets.
    U.S. long-dated Treasury yields rose again in extension of a
trend over the last few weeks fueled by solid U.S. economic data
that reinforced expectations of multiple interest rate hikes
over the next 12 months.  urn:newsml:reuters.com:*:nL2N1WQ14E 
    Investors also worried about the impact of trade tensions on
corporate profits and Hurricane Michael's landfall in Florida
adding to the uncertainty. 
    The Nasdaq registered its biggest daily drop since June 24,
2016, hurt by technology stocks which had their biggest one-day
drop since August 2011. The S&P 500 ended the day down 3.3
percent, representing a 4.95 percent drop from its Sept. 20
record closing high. 
    "It's a bit of a blood bath today, clear risk-off action
with few places to hide. Gold is up a little bit. The Vix is up
more substantially," said Ed Campbell, senior portfolio manager
at QMA, a division of PGIM, which is the asset management branch
of Prudential Financial.
    "It's primarily the cumulative effect of interest rate moves
over the past five days and news reports about trade impacting
companies," he said. "We saw stocks hanging in there pretty good
as interest rates were moving and now they're starting to crack.
Markets are starting to contemplate that this could be a Fed
that's over-zealous in terms of interest rate hikes."
    The Dow Jones Industrial Average  .DJI  fell 831.83 points,
or 3.15 percent, to 25,598.74, the S&P 500  .SPX  lost 94.66
points, or 3.29 percent, to 2,785.68 and the Nasdaq Composite
 .IXIC  dropped 315.97 points, or 4.08 percent, to 7,422.05.
    All three indexes had hit records between Aug. 30 and Oct.
3. The Russell 2000 small-cap index closed down 2.9 percent. 
    Mona Mahajan, U.S. investment strategist at Allianz Global
Investors in New York, said the market could potentially sell
off as much as 10 percent from its records before advancing
again.
    "The market is digesting the potential that rates moving 
upwards eventually seep into the real economy in the form of
mortgage rates, auto rates, student lending rates," Mahajan
said. "What we're seeing here is the market positioning for
potential lower growth."
    But assuming economic growth stays intact, "this could be an
interesting buying opportunity," according to Mahajan, who said
equity markets tend to perform well in the six months after U.S.
midterm elections.   
    The S&P technology sector  .SPLRCT  dropped 4.8 percent,
with Apple Inc  AAPL.O  creating the biggest drag with a 4.6
percent decline. 
    The communications services,  .SPLRCL , consumer
discretionary  .SPLRCD , energy  .SPNY  and industrial  SPLRCI 
sectors all showed declines of more than 3 percent. 
    The energy sector was one of the biggest losers for much of
the day as U.S. oil production was decimated while the industry
waited out Hurricane Michael.  urn:newsml:reuters.com:*:nL2N1WQ199
    The CBOE Volatility Index  .VIX , Wall Street's "fear
gauge," rose 7 points, or nearly 44 percent, to 22.96, going
above 20 for the first time since April 11 and hitting its
highest close since April 2.
    The best performer in the sea of red was the defensive
utilities sector  .SPLRCU , which closed down 0.5 percent.
    Tim Ghriskey, chief investment strategist at Inverness
Counsel in New York said risk parity funds could have made the
sell-off more pronounced.
    “Risk parity has influence in any market by accentuating the
change in asset class exposure,” said Ghriskey.
    Declining issues outnumbered advancing ones on the NYSE by a
7.27-to-1 ratio; on Nasdaq, a 7.05-to-1 ratio favored decliners.
    The S&P 500 posted 12 new 52-week highs and 47 new lows; the
Nasdaq Composite recorded 12 new highs and 227 new lows.
    On U.S. exchanges 9.86 billion shares changed hands compared
with the 7.42 billion average for the last 20 trading sessions. 

 (Additional reporting by April Joyner, Charles Mikolajczak,
Lance Tupper, Caroline Valetkevitch and Lewis Krauskopf in New
York and Shreyashi Sanyal in Bengaluru; Editing by Clive McKeef
and James Dalgleish)
 ((sinead.carew@thomsonreuters.com; +1 (646) 223 6186; Reuters
Messaging: sinead.carew.thomsonreuters.com@reuters.net))

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