Coverage: Stock market drop erases 2018 gains

The stock market sell-off on Wall Street intensified Wednesday, knocking the Dow down more than 600 points and wiping out the gains for the year for the blue-chip average and the broad Standard & Poor’s 500 index.

Adam Shell of USA Today had the news:

Technology stocks, which had been the best-performing part of the market earlier in 2018, suffered the biggest declines. The Nasdaq composite, home to many of the market’s most popular tech stocks, plunged 4.4 percent, pushing it down 12.3 percent from its late August high and deeper into official “correction” territory.

The latest swoon, which knocked the S&P 500 down more than 3 percent Wednesday, signaled to many Wall Street pros that the decline was entering a new, more dangerous phase. There’s growing concern now that this decline is more than a garden variety pullback, or drop of 5 percent to 9.99 percent, and could morph into a drop of 10 percent of more for the broad market.

“With the big sell-off today, the market may have moved from pullback into correction territory,” says Nick Sargen, chief economist and senior investment advisor for Fort Washington Investment Advisors.

Juan Carlos Arancibia of Investor’s Business Daily reported that small cap stocks are off as well:

Small caps saw the Russell 2000 plunge more than 3% at the close. The index, which led the market’s correction, is down about 15% from its prior high.

Despite steep losses, volume was lower on the Nasdaq and modestly higher on the NYSE, according to unconfirmed data. Breadth was surely bearish, with decliners over advancers by a ratio of 11-to-2 on the Nasdaq and by 7-to-2 on the NYSE.

On Tuesday, indexes rebounded impressively as the Nasdaq erased most of a loss that exceeded 2%. But there was no continued momentum Wednesday, dashing hopes that the positive reversal would extend a market rebound. Instead, the Nasdaq and S&P 500 undercut Tuesday’s lows.

As The Big Picture noted, Tuesday’s bounce gave no assurances that a recovery could last.

Liz Moyer of CNBC.com reported that potential profit margin shrinkage scares investors:

As they have all year, companies are reporting mostly good financial results for the third quarter. But this time around, executives have been talking about the challenges they face with rising production and materials costs and relatively new tariffs. Some of these executives say their profit margins risk getting squeezed by these factors, adding they might have to pass rising costs on to customers, if they haven’t already.

Seven out of 11 sectors of the S&P 500 are in correction territory, meaning they have lost 10 percent or more since their most recent highs. Hardest hit are materials stocks, financials, energy and industrials. Consumer staples are a bright spot, on pace for their fifth straight month of gains fueled by Procter & Gamble and others.

Wall Street’s so-called fear gauge, the CBOE Volatility Index, is at 25, the highest it’s been since the market swoon earlier this year. It’s an index that tries to measure what direction traders think the S&P will take in the near term.