US markets drop sharply as investors are spooked by rising rates

The benchmark S&P/ASX200 index was down 119.1 points, or 1.97 per cent, at 5,930.7 points at 1030 AEDT on Thursday, slipping below the 6,000-point mark for the first time since early June.

The increase in yields from these bonds - which are parcels of USA government debt - can hurt stocks since they will provide competition for investors' cash.

Stock in all 30 blue-chip index companies fell, with Boeing and Caterpillar dropping at least 3.8 per cent. The stock fell 16.8 per cent to 49 cents.

Shares in Facebook, Amazon, Apple, Netflix and Google's parent company Alphabet - the so-called "FAANG" stocks that have driven U.S. markets to all-time highs recently - all fell in NY trading.

"The stock market in the USA has started to take notice, and will continue to, particularly if the speed at which rates rise becomes alarming", Jeffrey Gundlach, chief executive of Doubleline Capital, told Reuters last week. Rising interest rates from the Fed and a tight employment market don't reassure investors, either. Think of it this way, if the Treasury issues a $1000 bond paying 3 percent interest, investors will not pay $1000 for an older bond paying 2 percent interest.

Oil firms Hess Corp and Marathon Oil fell around 7 per cent as Chevron dropped 3 per cent ahead of the third-quarter earnings season.

The communications services, consumer discretionary, energy and industrial sectors all showed declines of more than 3 percent.

In technology, Microsoft dropped 3.1 per cent to US$108.76 Wednesday and Nvidia lost 4.7 per cent to US$253.13.

Insurance companies dropped as Hurricane Michael continued to gather strength and came ashore in Florida bringing winds of up to 155 miles an hour.

The 10-year Treasury yield rose to 3.22% from 3.20% late Tuesday after earlier touching 3.24%. The stock fell 15% to 50¢. Higher rates can slow economic growth, erode corporate profits and make investors less willing to pay high prices for stocks.

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Adams said investors have concerns about their future profitability, too, making technology stocks more volatile in the last few months.

There have recently been several indications that the USA housing market has cooled, likely in part due to higher rates on mortgages.

Stocks and bonds traditionally have been in a tug of war for capital, but for the past 10 years bonds have had one arm tied behind their back, said Jack Ablin, chief investment officer and founding partner at Cresset Wealth Advisors in Chicago.

Sears has closed hundreds of stores and sold several famous brands or put them on the block as it sees more customers abandon its stores.

United States crude settled down $1.79 at $73.17 per barrel and Brent fell $1.91 to settle at $83.09.

The CAC 40 in France dropped 2.1 percent, Germany's DAX lost 2.2 percent and the FTSE 100 in London fell 1.3 percent.

Canada's main stock index had its worst day in more than three years on Wednesday as North American markets plummeted on a broad sell off by nervous investors.

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Brazil's Bovespa lost 2.5 per cent and the Merval in Argentina sank 2.2 per cent.

Japan's Nikkei 225 added 0.2 percent, South Korea's Kospi dropped 1.1 percent and the Hang Seng in Hong Kong gained 0.1 percent.

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