While you were sleeping: Wall St slides, Treasuries stabilise
By Margreet Dietz
Feb. 6 (BusinessDesk) - Wall Street slid as investors reassessed valuations with the potential for interest rates to rise more than they had previously anticipated.
In 1.29pm trading in New York, the Dow Jones Industrial Average sank 1.8 percent, while the Nasdaq Composite Index dropped 1.1 percent. In 1.14pm trading, the Standard & Poor’s 500 Index retreated 1.3 percent.
US Treasuries edged higher, pushing yields on the 10-year note 1 basis point lower to 2.83 percent. That’s still near the highest level in four years.
“I think what’s happening right now can be compared to early 2016 where we saw a pullback that was confidence related rather than fundamental and we saw it reverse fairly quickly,” Brad McMillan, chief investment officer for Commonwealth Financial, told Reuters.
“Seeing the 10-year break multi-year highs and the fact that it happened quickly made the market realise there are some real risks out there,” according to McMillan.
Some predict a further slide in equities as investors come to grips with the fact that the Federal Reserve may hike rates more than previously expected, but they also say it will pay off to stay the course, Bloomberg reported.
“It’s likely the pullback has further to go as investors adjust to more Fed tightening than currently assumed,” Shane Oliver, Sydney-based global investment strategist at AMP Capital Investors, which oversees about US$141 billion, told Bloomberg. “The pullback is likely to be just an overdue correction, with say a 10 percent or so fall, rather than a severe bear market.”
The Dow fell as declines in shares of Exxon Mobil and those of Johnson & Johnson, recently down 4.8 percent and 3.3 percent respectively, outweighed advances in shares of Intel and those of Apple, recently up 0.9 percent and 0.4 percent respectively and the two only two stocks in the Dow to gain in afternoon trading.
Apple might drop Qualcomm in favour of Intel as the supplier for modem chips in its next generation of iPhones, two brokerages said, according to Reuters. Shares of Qualcomm dropped 4 percent as of 1.21pm.
Meanwhile, shares of Bunge rallied, up 4.1 percent as of 1.21pm in New York. Archer-Daniels-Midland is in advanced talks to acquire the commodity trader, accelerating the pace of consolidation in the global grain-trading industry, according to people familiar with the matter, Bloomberg reported.
ADM and Bunge, which has a market value of about US$11.5 billion, could reach an agreement as early as this week, the people said, asking not to be identified because the deliberations are private, according to Bloomberg.
The takeover talks are ongoing and could still fall apart, while other bidders could still be interested in acquiring Bunge, the people said, Bloomberg reported.
Shares of ADM, which is scheduled to announce earnings on Tuesday, traded 0.1 percent stronger recently.
ADM, Bunge and Glencore declined to comment, Bloomberg reported.
In Europe, the Stoxx 600 Index ended the day with a 1.6 percent drop from the previous close. Germany’s DAX Index slid 0.8 percent, while the UK’s FTSE 100 index shed 1.5 percent, as did France’s CAC40 Index.
Tesco, Britain’s largest grocer, appointed Booker Group Chief Executive Officer Charles Wilson to lead its UK operations following Tesco's takeover of the wholesaler next month.
Wilson will replace Matt Davies who will step down and leave the group at the end of April, Tesco said in a statement.
“Charles Wilson has an excellent track record at Booker and we expect the appointment to be taken positively by the market,” analysts at Bernstein said, according to Reuters.
Shares of Tesco closed 1.7 percent weaker in London.