By ScotiaWealth - The Zukiwsky Group (Sponsored)

Market Watch – October 12, 2018

Oct 12, 2018 | 1:28 PM

U.S. Stocks Extend Losses After Wild Wednesday

After a punishing Wednesday, U.S. equities surrendered more ground Thursday as investors re-evaluated rising U.S. bond yields, signs of slowing global growth and ongoing trade tensions. Wall Street indexes got a boost early Thursday on reports that inflationary pressures in the U.S. remain largely in check. U.S. consumer prices rose less than expected in September, decreasing the likelihood the Federal Reserve will be forced to raise interest rates faster than expected. Technology stocks, which had driven much of the market selloff Wednesday, stabilized in early trading Thursday, while energy stocks fell along with crude-oil prices. However, the selloff picked up pace in later trading with the Dow and S&P 500 shedding 2% for the day, while the Nasdaq declined 1.25%.

And the damage wasn’t just limited to Wall Street. Wednesday’s sharp selloff in the U.S. spilled over into global markets, as investors sold off growth stocks, with the tech sector hard hit again. Stocks were hit particularly hard in Asia, where no market was spared in the sweeping selloff. Meanwhile on Bay Street, the TSX tumbled more than 500 points over Wednesday and Thursday.

The sharp selloff and volatility has been sparked in part by the rapid rise in U.S. bond yields and the Fed’s rate hikes. The rise in bond yields took a break on Thursday as investors looked for a safe haven from volatile equity markets. The yield on the 10-year U.S. Treasury note declined to 3.14%, down from nearly 3.26% on Tuesday. Bond yields across much of Europe also fell except in Italy, where concerns over the country’s budget plans have ignited a selloff in recent weeks.

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North American Equities Tumble

For the four days covered in this report, the Dow dropped 1,394 points to close at 25,053, the S&P 500 shed 158 points to settle at 2,728, while the tech-heavy Nasdaq declined 459 points to close at 7,329. In three days of trading, the TSX surrendered 629 points to end at 15,317.

Equities/Strategy

Equities

Hold Steady. Recent market volatility is attributable to several factors that have weighed on investor sentiment, including ongoing trade tensions, the strength of the U.S. dollar, Italy’s proposed budget deficit, upcoming U.S. mid-term elections and, of course, the rapid rise in bond yields. While our tactical asset allocation remains overweight equities, we have conservatively positioned our portfolios by including alternative investments, emphasizing high quality equities in developed versus emerging markets, and avoiding high yield issuers.

(Big Picture – Bill Curry)

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by ScotiaWealth - The Zukiwsky Group (Sponsored)

Market Watch – October 12, 2018

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