Wall Street stocks were experiencing another rocky session on Tuesday, with technology shares especially volatile, as worries about higher interest rates and trade conflict threatened the multi-year bull market. Near midday, major US indices were all firmly lower for a second straight session, with the benchmark Dow down nearly two percent.
The latest round of weakness came on the heels of an acrimonious weekend Asia-Pacific Economic Cooperation summit that showcased ongoing US-China tensions over trade just days before Presidents Donald Trump and Xi Jinping are set to meet during a Group of 20 summit in Argentina.
Investors are also edgy over the prospects the Federal Reserve could continue to hike interest rates even in the face of stock market weakness this fall.
While analysts generally accept the Fed's plan to lift rates again in December in light of strong US jobs and consumer sentiment data, many fear further increases in 2019 could hasten the stock market's fall. The S&P 500 in August marked the longest-ever bull market, a landmark that has led to discussion of "late-cycle" gains on Wall Street.
"The odds are increasing that, if the Fed continues to raise rates and tighten, the bull market could end in 2019," said Matt Miskin, an analyst at John Hancock Near 1635 GMT, the Dow Jones Industrial Average stood at 24,567.70, down 1.8 percent, about 150 points below its year-end level last December.
The broad-based S&P 500 fell 1.3 percent to 2,655.00, while the tech-rich Nasdaq Composite Index shed 1.0 percent to 6,959.81.
The losses come on the heels of a dreary session on Monday that saw all three major indices shed at least 1.5 percent. TD Ameritrade's Shawn Cruz said this week's pullback had been exacerbated by low trading volumes due to limited staffing ahead of the Thanksgiving holiday on Thursday. Cruz predicted stocks could steady after the holiday passes.
"This is usually where we start to see sellers get exhausted," Cruz said of current stock prices. Market watchers say political uncertainty resulting from the recent midterm congressional elections in which Trump's party lost control of the lower branch of Congress is not a prime factor in the latest bout of weakness.
Tuesday's declines were broad-based but tended to be most pronounced among retailers, following a series of mixed earnings reports ahead of the crucial holiday shopping period, and among industrial companies, such as Caterpillar and United Technologies.
Shares of technology giants Apple and Microsoft were also firmly lower, although Facebook and Google parent Alphabet had eked out gains following apparent bargain-hunting.
Weakness in the technology sector often serves as a trigger for broad-based selling because of the importance of continued growth in companies like Amazon and Netflix to investor sentiment about broader economic expansion.
"These stocks are widely owned and they have 'always worked,' which means they have left a lot of owners taken aback by their technical breakdown and the lack of any buy-the-dip assertiveness that has sustained them time and again in this bull market," said Briefing.com analyst Patrick O'Hare. "In a certain respect, this market is waiting for them to show up again to instill some confidence in the idea that the broader-market sell-off has run its course."
This week's pullback follows a blowout third-quarter earnings period. Companies in the S&P 500 are on track to earn 25.7 percent higher third-quarter profits, according to FactSet.
One challenge going forward, though, is that earnings estimates have "started to move sideways at best," said Miskin.
"We probably need to see a resolution on trade come through to help this market get up off the ground," Miskin told AFP.
But Cruz offered a somewhat more sanguine outlook for US stocks, saying companies were still generating "solid" earnings growth and that the US-China trade dispute, while a worry, still featured much posturing and threats. That said, a significant worsening in the trade outlook would be bad for Wall Street, Cruz said.
"There's a little bit of uncertainty but to really push this market down to a significantly new level than we've tested before...you would need something set in stone that investors don't like," he said.