Dow falls 150 points at the open, but losses not as bad as feared as interest rates decline

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October 11, 2018 1:41 pm Published by

Stocks fell on Thursday, but the losses were mitigated after the release of weaker-than-expected inflation data.

The Dow Jones Industrial Average dropped 150 points as Walgreens Boots Alliance lagged. The S&P 500 pulled back 0.6 percent, on pace for a six-day losing streak, while the Nasdaq Composite slid 0.7 percent.

Tech shares were under pressure once again. Amazon fell 3.6 percent, while Apple declined more than 1 percent. Facebook and Netflix also traded lower.

The consumer price index rose 0.1 percent in September, well below the expected gain of 0.2 percent.

Treasury yields fell from multiyear highs after the release of the data. The 10-year Treasury note yield traded at 3.167 percent while the two-year yield slipped to 2.848 percent.

Rising U.S. Treasury yields had been keeping investors on their toes in previous sessions. The benchmark 10-year note yield recently hit its highest level in seven years while the two-year yield reached its highest mark since 2008 on Wednesday.

The rise in yields has stoked fears that rising borrowing costs could slow down the economy. It also adds concerns over what the future of U.S. monetary policy. The Federal Reserve has hiked rates three times this year and is largely expected to raise rates once more before year-end.

“Net, net, the economy may be running hot, but it isn’t fast enough to kick up inflation pressures and calls into question the need for Fed policymakers to move interest rates to higher levels,” Chris Rupkey, chief financial economist at MUFG Union Bank, said in a note.

President Donald Trump criticized the Fed’s strategy on more than one occasion on Wednesday, saying that the central bank was “making a mistake” by raising rates. In a telephone interview with Fox News later that day, he said he wasn’t happy with the Fed, and that it was “going loco” and there was no reason for them to continue to raise rates at the pace they were doing.

International Monetary Fund managing director Christine Lagarde refuted Trump’s claims, saying that she “would not associate” Fed Chair Jerome Powell “with craziness.”

Stock futures indicated far steeper drops earlier in the day. At one point, Dow futures pointed to a more than 400-point drop at the open.

Thursday’s moves come a day after the Dow sank more than 800 points and the S&P 500 dropped more than 3 percent. It was also the 28th time since 2011 the S&P 500 posted a more than 2 percent decline, according to data from Birinyi Associates. The data also shows the broad index has traded higher 59 percent of the time in the following day, averaging a gain of 1 percent. The index also falls 41 percent of the time after such a drop, and averages a decline of nearly 2 percent on those days.

Worries over fast-rising interest rates and a steep tech rout sent U.S. equities tumbling on Wednesday. International markets also fell on Thursday. Asia-Pacific stocks saw sharp declines by the region’s market close, while European shares tumbled.

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