October’s stock skid deepened losses Friday on a global sell-off in technology companies.
The Dow Jones industrial average dropped more than 525 points, or 2.1 percent, in morning trading — before an afternoon reprieve left it to close down about 300 points, or 1.2 percent, to 24,688.31.
The tech-heavy Nasdaq composite index lost 2.1 percent. The Nasdaq is having its worst month in 10 years — notching a 10.2 percent loss on the month.
The S&P 500 gave up 1.7 percent. All 11 S&P 500 sectors were down Friday; the index is having its worst month since 2009. The S&P dipped during the day but bounced back enough to barely escape correction at close.
Friday’s declines erased all of the gains for the Dow and S&P 500 for 2018 for the second time in a week.
Markets were buffeted all week by politics, interest rates, President Trump’s quarrels with the Federal Reserve and, not least of all, some big earnings reports and data from China that made investors think the global economy may have reached its growth limit.
Muted outlooks from blue-chip giants Caterpillar and 3M shook markets Tuesday, and the volatility carried through the rest of the week. Markets staged a big comeback Thursday, but Amazon.com and Google dampened the party after the market closed as the tech juggernauts reported profitable but less than spectacular revenue growth. (Amazon founder and chief executive Jeffrey P. Bezos owns The Washington Post.) That sent shivers through global traders, resulting in Friday’s seesaw. Markets dropped dramatically but then staged a rebound with the help of a strong report on gross domestic product for the third quarter.
The Commerce Department reported a quarterly increase of 3.5 percent in U.S. GDP, which exceeded projections.
Investors were left with a down week, a bloody month and a reality check on just how far they could ride the FAANG — Facebook, Amazon, Apple, Netflix and Google — which have been responsible for a big chunk of the gains in the bull market, which is in its 10th year.
But the highflying technology sector has been hit hard in recent weeks as investors sold off on fears that the FAANG’s double-digit revenue increases could not hold into 2019.
“What is causing investors to elevate their agita is the worry over Amazon and whether a slowdown in revenues is a reflection of the U.S. consumer,” said Sam Stovall, a chief investment strategist at CFRA.
Oil prices rose slightly Friday, but they were down for the third week in a row as there appeared to be ample supply to meet worldwide demand. Benchmark Brent crude rose to $77.62 per barrel Friday but declined 2.2 percent on the week. The price is down from nearly $87 earlier this month.
Saudi Arabia, a major oil producer under fire over the killing of Washington Post contributing columnist Jamal Khashoggi, said this week that it would open up its taps to offset any loss from the reimposition of U.S. sanctions against Iran next month.
Phillip Swagel of the University of Maryland’s School of Public Policy sees signs that global economic growth is pushing limits even as the U.S. economy remains pretty healthy.
“It would be nice of the rest of the world will keep growing and sustain us,” Swagel said. “China has slowed. Europe is having a squabble between Brussels and Italy. There is uncertainty over Brexit. Japan is doing okay, but no one is expecting a contribution from Japan to global growth.”
He added that one of the biggest obstacles to U.S. economic growth is the uncertainty over tariffs and whether they will limit business investment. Business capital expenditures are a big contributor to growth and jobs and were a major goal of the Republican tax cut.
Still, many investors are selling on concerns that the 2019 economy may not be as strong as that of the past year.
“With inflationary pressures growing, an increasing number of corporates are guiding profitability expectations downward for 2018 and 2019, citing the negative impact of rising costs and the burgeoning tariff war,” said Kim Catechis, portfolio manager at Legg Mason affiliate Martin Currie.
Stovall said markets are going through a correction, which is a decline of 10 percent from their highs.
“I am a big believer in history,” Stovall said. He said he expects a roughly 14 percent correction in the S&P within weeks. “That’s the average since World War II. And that is setting us up for a post-election pop, which historically is a 17 percent gain.”