US stocks rebound in volatile afternoon trading

Join Colin Gleeson for live updates as traders grapple with markets chaos

Colin Gleeson Tue, Feb 6
 
LIVE: US stocks rebound in volatile afternoon trading

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  • 16:54
    Good afternoon. Trillions have been wiped off global markets today after stocks nosedived.

    The Iseq stock market index in Dublin this afternoon has begun to reverse earlier sharp declines, after markets in the US staged a recovery in mid-morning trading that has, for now, soothed fears of a global equities meltdown.

    By early afternoon the stock market in Dublin was down close to 2 per cent, as a sell-off that started on Monday looked set to continue. About 45 minutes later, however, the Dublin index had clawed back most of that decline, and was still rising.

    This apparent and ongoing reversal was spurred by a sharp rally in New York, where the Dow Jones industrial average was up 350 points mid-morning, after initially crashing by up to 500 points immediately after it opened.
  • 16:56
    My name is Colin Gleeson and you can join me here for live updates as the situation develops. You can tweet me @ColinGleesonIT if you'd like to get involved, and I'll post them here.
  • 16:59
    The Dow Jones is experiencing wild volatility, while in Dublin the Iseq is currently down 1.4 per cent.
  • 17:09
    Currently, shares are up in just three companies on the Iseq and the ESM.

    They are:

    Ryanair (up more than 2 per cent)

    Glenveagh Properties (up 0.4 per cent)

    AIB (up 0.75 per cent)
  • 17:10
    Irish stocks with heavy exposure to the United States have been hit particularly hard.

    Some highlights include:

    CRH (down 2.2 per cent)

    Kerry Group (down 2.3 per cent)

    Kingspan (down 1.4 per cent)

    Glanbia (down 0.4 per cent)
  • 17:14
    In case you’re wondering what all this is about, Cliff Taylor has put together a Q&A that will hopefully answer some of your questions. You can read it here.

    He explains that events like this occur when stockmarkets are hit with a wave of people selling and very few buying.

    The bout of nerves which started on Friday and led to chaotic trading on Wall Street on Monday relates to fears that stronger US economic growth may lead to rising inflation and interest rates.
  • 17:19

    Many of you may also be wondering how all this will affect you.

    Well, the main issue is pension funds, but the experts are saying there’s no need to panic yet, even if pensions will have fallen by about 2-3 per cent due to the recent sell-off.

    John Tuohy, chief executive of Acuvest, which is a pensions’ management and advisory group, said the latest volatility is not a huge concern.

    “The headlines are disproportionate to the moves,” he says, while Mairead O’Mahony, Mercer’s DC and financial wellness leader, agrees, although is a little more bearish.

    “We’re not panicked by it, although it was a significant enough fall and the volatility of stock markets has more than doubled over the last week which is an indicator of the panic and fear in the market,” she says.

    With global markets down by about 4 per cent over the last two days, O’Mahony says Irish pension funds will likely be down about 2-3 per cent.

    Fiona Reddan has more here.

  • 17:22

    In the US, treasury secretary Steven Mnuchin has played down worries about a selloff.

    "I am not overly concerned about the market volatility,” he said. “I think the fundamentals are quite strong.

    "I think you've seen a normal market correction, although large," he continued, adding that the move did not raise any financial stability concerns.”

  • 17:28

    Some of the worst affected stocks on the Iseq include:

    Aminex (down 12.5 per cent)

    First Derivatives (down 8.9 per cent)

    Hostelworld (down 4.5 per cent)

    Mincon (down 4.1 per cent)

    C&C (down 3.9 per cent)

    Kenmare Resources (down 3.8 per cent)

    Datalex (down 3.12 per cent)

    Hibernia Reit (down 3 per cent)

  • 17:33

    Oil and cryptocurrencies have also fallen.

    Brent crude futures were down 55 cents at $67.07 a barrel at a short time ago, while US crude futures were trading 37 cents lower at $63.78.

    Since the benchmark US stock index, the S&P 500, hit a record high on January 26th, the index has lost 8 per cent. Oil has shed 4.9 per cent, while the cryptocurrency bitcoin has lost half its value.

  • 17:37
    There hasn’t been a whisper yet from US president Donald Trump who has been cheerleading and taking credit for “record” stock market performances in recent times.
  • 17:41

    US stocks are wavering between gains and losses in volatile trading. After an initial 2 per cent drop, major Wall Street indexes recovered but did not sustain the rebound.

    Between the day's highs and lows, the Dow Jones Industrial Average traded in an almost 1,000-point range.

    European equities hit a six-month low, with London and Paris indexes each down more than 2 per cent. Hong Kong and Tokyo stocks saw steeper drops. Bond prices gained.

  • 17:43

    Here are some comments Reuters have pulled together from analysts and investors:

    "When you get these periods of intense panic it makes sense to be buying while others are forced sellers but on the other hand you don't know that the negative mood will go away quickly.

    "The last time we had that degree of panic was August 2015 which was the first of the two Chinese devaluations.

    “At that time, it took about eight weeks before the market digested the bad news and started rallying again ... The trick is not to rush on both feet but to be buying gradually during the more intense negative days."

    - Trevor Greetham, head of multi asset at Royal London Asset management in London

  • 17:44

    “The correction we are seeing is not economically significant at this point. The stock market is basically flat year-to-date and up significantly over any longer time horizon. The underlying economy is strong and over time that should provide support to the market.

    "That said, we don’t expect a repeat performance from the stock market in 2018. We expect interest rates to rise across the curve, driven in part by mounting inflationary pressures as reflected in last month’s wage increases.

    "Higher interest rates will make it harder for the stock market to sustain lofty valuations and so we expect a lower return and higher volatility from the equity market this year.”

    - Eric Winograd, senior economist at AllianceBernstein in New York

  • 17:47

    “What is happening is you continue to have investors re-rating stocks based on higher inflation and higher interest rate expectations.

    "There was heavy, heavy positions in long equities, short treasuries, short dollar, low volatility and as this has changed, some of those players are certainly getting out of those positions and it is exacerbating some of the volatility.

    "The other thing is, certainly we have a government shutdown pending, and even with the correction nobody is really talking about it.

    “But that is certainly upcoming here, many are expecting a deal will be struck or they will kick the can down the road until March.

    “Also this transition in Fed leadership, until we see what Powell policy is, the markets aren?t likely to give the Fed the benefit of the doubt until they see what is going to happen in terms of policy."

    - Michael Arone, chief investment strategist at State Street Global Advisors in Boston

  • 17:51
  • 17:57

    Back in the US, the television in Air Force One's board room is usually turned to Fox News, but when White House staff boarded the plane yesterday, the network was broadcasting a red chart illustrating the market decline, so aides, naturally, turned it off.

    US treasury secretary Steven Mnuchin - who was on board with Trump - approached the press cabin. He waved off questions about the stock market and insisted that Fox News, which covered the market downturn throughout the flight, had remained on the TV.

    Bloomberg are reporting that the television hadn't been, and that aides only turned it back on toward the end of the flight.

    Later the White House issued a statement drawing on a familiar Washington strategy for addressing market downturns. Like George W. Bush, Ronald Reagan and Herbert Hoover in their own moments of market distress, the Trump team struck an upbeat note.

    "The president's focus is on our long-term economic fundamentals, which remain exceptionally strong, with strengthening US economic growth, historically low unemployment, and increasing wages for American workers," press Secretary Sarah Huckabee Sanders said.

    So there.

  • 18:10

    Over in the UK, nearly £50 billion was wiped off the FTSE 100.

    London’s blue chip index ended the day down 2.6 per cent or 193.58 points at 7,414.4 points — marking its lowest close since April 2017.

    The decline mirrored by both the German Dax and French Cac 40, which each dropped 2.3 per cent.

    It adds to deep losses during Monday’s session when more than £27 billion was wiped off the value of London’s blue-chip stocks.

  • 18:25
  • 18:28

    International Monetary Fund chief economist Maurice Obstfeld has said world economic fundamentals are strong, despite all the turmoil, with more trade, more investment and faster-than-expected growth in major economies.

    "Right now in the last few days we've seen some market turbulence around the world, but the fundamentals are really strong.

    "We've been seeing the fundamentals improving since the middle of 2016 and we see very broad-based growth."

  • 18:31

    Cryptocurrencies continued to whipsaw investors, according to Bloomberg, sending Bitcoin to its lowest level since October before paring the day's losses, as worries over tighter regulation by US authorities and central bankers elsewhere gave traders fresh reasons to exit after a brutal start to 2018.

    The selloff has now knocked about half a trillion dollars from digital coins since early January. That's shaken a nascent market whose core attraction - anonymity and decentralisation - is being challenged as never before by regulators.

  • 18:34

    We’re hearing the term “whipsaw” a lot today.

    In case you wondering, “whipsaw” is a condition in which a security's price heads in one direction, but is followed quickly by a movement in the opposite direction.

    There are two types of whipsaw patterns, with the first involving an upward movement in a share price, which is then followed by a drastic downward move, causing the share's price to fall relative to its original position.

    The second type occurs when a share price drops in value for a short while, and then suddenly surges upward toward a positive gain, relative to the stock's original position.

    Courtesy of Investopedia.

  • 18:34
  • 18:59

    The Dow Jones is stabilising a bit for now and is currently down 0.3 per cent. In the last three days however, it’s come down 7.3 per cent, while it’s down 3.9 per cent in a month.

    Among some American companies with Irish operations,

    - Pfizer is down 1.1 per cent
    - Intel is down 1.3 per cent
    - Merck is down 2.6 per cent
    - Coca Cola is down 2.1 per cent

    It’s important to remember that employees of these firms in Ireland are likely to have share options in many of them.

  • 19:04

    Elsewhere in the US, a few highlights from the other biggest losers include:

    - Exxon Mobil (down 3 per cent)
    - Travelers Cos (down 2.8 per cent)
    - Johnson and Johnson (down 1.2 per cent)
    - McDonalds (down 0.8 per cent)
    - Walmart (down 0.6 per cent)

  • 19:09

    "We're just seeing swings all day long," CNN's Cristina Alesci has said in relation to the Dow.

    “Volatility is probably here to stay at this point.”

    And why's that?

    “We simply - and this is going to sound really, really simple - we simply had stability for too long. The market was headed in one direction for way too long.”

  • 19:20
  • 19:24
    The Dow is down 0.4 per cent on the day, 6.9 per cent on the week, and 4 per cent on the month. It's up 21 per cent on the year.
  • 19:28

    Now, have your handkerchiefs at the ready.

    The plunge in US stocks has cut the fortunes of the world’s 500 richest people by $114 billion.

    That’s according to Bloomberg, which has done some number crunching for us.

  • 19:28

    Berkshire Hathaway chairman Warren Buffett, the world’s third-richest person, was hardest hit, losing $5.1 billion. Berkshire is the biggest shareholder of Wells Fargo & Co, which fell 9.2 percent, the most in the S&P 500.

    The 87-year-old was one of 18 billionaires in the Bloomberg ranking to lose more than $1 billion on the day.

  • 19:29

    Elsewhere, Facebook chief Mark Zuckerberg’s fortune tumbled by $3.6 billion, the second-biggest decline.

    Even Amazon.com chief executive Jeff Bezos, the world’s richest person, wasn’t immune to the carnage. His fortune slipped $3.3 billion to $116.4 billion as shares of the retail behemoth fell 2.8 percent.

    Alphabet’s Larry Page and Sergey Brin each took hits of about $2.3 billion.

    The rout followed more modest declines on Friday that erased $68.5 billion in wealth from the world’s 500 richest people.

  • 19:36

    Billionaire investor Carl Icahn has said he expects stock markets to bounce back after the massive sell-off, while warning that current market volatility is a harbinger of things to come.

    "This is just a little rumbling, a little fault line," he told CNBC. "Before the earthquake, you get the rumblings and then maybe you don't have an earthquake for 20 years, or 10 years, or five years. But these are the rumblings."

    The volatility of recent weeks is cause for concern, he said, adding that he doesn't remember a two-week period as turbulent as this one.

    He said the problem is that too much money is flowing into the index funds, where investors don't know what they're actually investing in.

    "Passive investing is the bubble right now, and that's a great danger," he said. Eventually, that will implode and could lead to a crisis bigger than in 2009, he added. "When you start using the market as a casino, that's a huge mistake.”

  • 20:06
    US equity indexes have been fluctuating in the final hours of trading today after a tumultuous morning that saw the Dow swing more than 900 points in 25 minutes, says Bloomberg.

    The S&P 500 Index plunged as much as 2.1 per cent at the open of trading Tuesday before regaining ground. The gauge swung between gains and losses of more than 1 per cent each for the first time since 2015 and crossed the break-even line at least a dozen times.

    The Dow declined more than 500 points before it, too, bounced back.
  • 20:18
    Paul Sommerville, a 2011 Dail candidate and the chief executive of Dublin-based Sommerville Advisory Markets, says the trajectory of Irish trading was directly attributable to the situation in the US.

    He rejects the notion, advanced by some analysts in the US, that the situation there was just an inevitable stock market correction or “blip”.

    “I don’t believe this is a blip. I think we will see volatility for the next 18 months and retail investors need to be very careful,” he says.
  • 21:01
    US stocks rebounded in volatile afternoon trading on Tuesday, with major indexes up more than 1 per cent following the biggest one-day drops for the S&P 500 and the Dow in more than six years, according to Reuters.

    Stocks swung from negative to positive after indexes started the session 2 per cent lower, underscoring a return of volatility to a market that until recently was marked by an absence of major shifts.

    The Dow had a more than 1,000-point difference between its high and low on the day. The sharp declines in recent days marked a pullback that had been long-awaited by investors after the market minted record high after record high in a relatively calm ascent.

    "It's been a crazy period and today the market is probably just trying to find some footing," said John Lynch, chief investment strategist at LPL Financial in Charlotte, North Carolina.
  • 21:29
    What a rollercoaster ride it's been, thanks for joining us and see our report from Peter Hamilton and Mark Paul on what's been happening in Dublin. Good night.