Stocks resumed their October tumble on Thursday, led by a drop in technology stocks that tracked a sell-off in China overnight.
Tech firms led the Wall Street sell-off, with the tech-heavy Nasdaq composite index and a closely watched index of semiconductor stocks slumping more than 2 percent. The Standard & Poor’s 500-stock index fell 1.4 percent, leaving the broad stock market index down nearly 5 percent this month.
A sharp decline in Chinese stocks set the tone for the tech-driven drop. China’s currency, the yuan, hit a 21-month low, amid the tariff fight between China and the United States, the world’s largest economies.
“Perceptions in markets are evolving, and more people are nervous that this is going to be a long, drawn-out affair,” said Robin Brooks, chief economist at the Institute of International Finance, a trade group and research provider.
China is expected to release data on Friday on how its economy fared in the three months through September. But growing concerns about the health of its economy, along with rising interest rates that could slow the American economy, have made investors jumpy and worried that a near-perfect investing environment — low inflation, strong growth and relatively low interest rates — is becoming tougher to navigate.
Here’s a rundown of what has been happening in the stock market.
Trading was volatile
The benchmark S.&P. was down as much as 1.9 percent. It ended the day down 1.4 percent.
Stocks started the day slightly lower after a big sell-off in China, but the drop picked up pace after the Treasury secretary, Steven Mnuchin, said he would not attend a financial conference in Saudi Arabia amid the investigation into the disappearance of a dissident Saudi journalist.
Why has October been so lousy
The selling on Thursday came amid a bout of big swings for stocks. On Tuesday, shares posted their biggest gains in seven months. That was just a few days after they suffered their steepest drop in eight months.
All month, worries about relations with China have weighed on technology stocks. The Nasdaq is down 7 percent this month. The Philadelphia semiconductor index is down nearly 9 percent.
Interest rates are another worry. Yields fell Thursday, but the yield on the 10-year note is higher than 3.15 percent, up from less than 2.5 percent a year ago.
Investors are concerned that rising borrowing costs could crimp domestic growth. Small stocks, which are particularly susceptible to higher borrowing costs, fell 1.8 percent. And other interest-rate sensitive areas of the stock market have been beaten up in recent weeks. The S.&P. home-building index is down 10 percent this month, as mortgage rates have pushed above 5 percent.
What are investors going to look to next?
We’re in the middle of earnings season — and results from companies could help assuage the worst concerns. On the whole, results should be good. When they’re tallied in a few weeks, profits for S.&P. 500 companies are expected to be up more than 20 percent, compared with last year. That’s largely thanks to strong economic growth in the United States and deep corporate tax cuts.
But on Thursday, investors seemed to find gloom even in good earnings news. United Rentals — a company that rents out construction and industrial equipment — tumbled 15 percent after reporting earnings that were better than expected. Investors did not like the look of softer-than-expected rental price growth, which can be a leading indicator of a slowdown in the highly cyclical rental industry.
“Investors look at slowing rate growth and say, ‘Well that’s a negative signal,’” said Steven Fisher, who covers United Rentals as an equity analyst at UBS.
In the weeks ahead, the biggest technology companies will report results. Given the focus on China, a report by Apple could be particularly important. Apple manufactures its products there, but China is also a significant market for the company.
Apple, which is down 4 percent this month, will report its results on Nov. 1.
