Markets

U.S. markets drop sharply as investors are spooked by rising rates

U.S. markets drop sharply as investors are spooked by rising rates

The benchmark Nikkei 225 dropped almost two percent at the open and extended losses to below the three-percent mark, as traders fretted about surging interest rates and an ongoing trade spat.

The S&P 500 was also down 3% while the tech-heavy Nasdaq lost 4%.

The steep drop in Japan followed a decline on Wall Street of almost 830 points, the biggest fall since February, amid Trump's latest criticism of the Federal Reserve, the USA central bank. The Standard and Poor's 500-stock index was approaching its longest losing streak in two years.

In fact it is his policies that are behind the changes: tax cuts and spending policies are expected to juice the economy, adding to the Fed's justification to raise interest rates, while trade conflicts raise costs for companies, which could hit the bottom line in quarterly earnings - something analysts said helped prompt Wednesday's sell-off.

Trump has departed from that practice and has said he would not shy from future criticism should the Fed keep lifting rates.

"I think it's good", Trump said of the stock decline.

Larry Benedict, founder of the Opportunistic Trader, said that even while some of the largest names in tech - including Netflix, Amazon, Google and Facebook - saw some of the steepest dips, they are all up significantly for the year. The drop was widely attributed to concern over rising Treasury yields and Chinese spying on US technology.




Higher rates can slow economic growth, erode corporate profits and make investors less willing to pay high prices for stocks.

The markets have been on a historic climb - with the Dow and S&P each notching dozens of new highs since 2016 - buoyed by a strong US economy and solid corporate earnings.

On Wednesday, the Dow fell 831 points, or 3.1 percent, to 25,598. It was at just 3.05 percent early last week.

Trump has previously voiced his displeasure with the Fed's rate hikes, saying he would rather shift his focus to the continued growth of the USA economy and creating more jobs.

"I like low interest rates", Trump said.

"A lot of people were concerned when the QEs were done whether the Fed would ever be able to downsize and I think the market has handled the supply very well, ' Mnuchin said".

Ivan Feinseth, Chief Investment Officer at Tigress Financial Partners, said that although the sell-off caught him off-guard, he thought many investors were unduly frightened by the prospect of rising rates. "The Fed will stay on a measured pace". In Paris, shares in Kering fell almost 10 percent, LVMH over seven percent and Hermes around five percent.


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