The Dow Jones Industrial Average fell over 300 points on Wednesday as tech names like Intel, Microsoft and Netflix were in the red, helping to also bring the Nasdaq Composite down over 100 points. The S&P 500 was also down just over 30 points as of 11:00 a.m. ET.
After the major indexes were in the midst of a historic bull run, a market correction was waiting in the wings, which has investors wondering how much of a pullback in U.S. equities will occur.
“Portfolio managers tend to move to the sidelines in a skittish tape out of fear of suffering from a quick and sharp pullback,” said Jeremy Klein, chief market strategist at FBN Securities.
“The fundamental environment, though, remains supportive of share appreciation. I contend that the concerns of rising interest rates are largely overblown. Specifically, I do not anticipate much more of an increase in longer dated Treasury yields,” said Klein..
Other tech giants like Apple and Cisco systems pulled back, 1.4% and 1.1%, respectively.
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Yields Resume Upward Trajectory
In the U.S. government debt space, the benchmark 10-year Treasury note and 30-year note continued their upward trajectory. The 10-year yield ticked higher to 3.227, while the 30-year rose to 3.392.
The rise comes as the wholesale cost of U.S. goods and services retreated during the month of September. The producer price index did rise 0.2% according to the Labor Department, which was in line with expectations based on a poll of economists.
“This latest inflation data corroborates our view that the Fed is likely to move ahead with another rate hike in December, bringing this year’s total to four,” economists at Oxford Economics wrote.
U.S.-China Trade Deal Demands
Treasury Secretary Steve Mnuchin issued a warning to China, saying the world’s second largest economy better not weaken its currency as both the U.S. and China attempt to ameliorate their trade disputes. Mnuchin apprently told the Financial Times that the Treasury Department will keep China’s currency market under close watch, which could be part of a trade deal as discussions between the two economic superpowers continue.
“As we look at trade issues there is no question that we want to make sure China is not doing competitive devaluations,” said Mnuchin. “The renminbi has depreciated significantly during the year. We are going to absolutely want to make sure that as part of any trade understanding we come to that currency has to be part of that.”
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