Nasdaq notches worst 1-day decline in 7 years; chip stocks, rate fears blamed

The Nasdaq took a pounding on Wednesday as the tech-laden index put in its worst day since 2011 amid a broader selloff of US stocks.

The Nasdaq Composite dropped 329 points, or 4.4 percent, to 7,108; the Dow Jones Industrial Average lost 608 points, or 2.4 percent, to 24,583; and the S&P 500 fell 85 points, or 3.1 percent, to 2,656.

The action confirmed a correction for the Nasdaq and erased the year's gains on the Dow and S&P 500, as disappointing forecasts from chipmakers and weak home-sales data raised concerns about economic and profit growth.

The Nasdaq closed 12.4 percent below its Aug 29 record closing high and recorded its largest one-day percentage drop since Aug 18, 2011. The S&P extended its October fall to 8.8 percent, the index's worst month since February 2009.

"This is really off the walls," said Donald Selkin, chief market strategist at Newbridge Securities. "Nothing fundamentally changed during the day. I think it's a technical breakdown. Look at the Nasdaq — down 300 points."

Kamal Khan, US editor at Investing.com, told China Daily that "at the core of this plunge was the evaporation of faith in the semiconductors, which is keeping tech overall from making any kind of recovery".

"AMD's lowered guidance after the bell today is going to make any sort of Nasdaq comeback tomorrow a big ask. And that stock is still up 100 percent year to date, so there's still plenty of room to fall."

Software giant Microsoft beat Wall Street profit and revenue estimates on Wednesday, driven by its cloud computing business, but Khan was skeptical about how much of a boost that would provide.

"Microsoft will help the Dow with its own rise, but software doesn't have the clout chips do in the broader market," he said. "The near-term hope for bulls is that there are enough solid numbers before the bell tomorrow from less-sexy stocks like ConocoPhillips and Bristol-Myers to get a stable open."

Also on the earnings front, chipmakers Texas Instruments and STMicroelectronics warned of slowing demand. They followed disappointing forecasts on Tuesday from industrial giants Caterpillar and 3M.

Ford Motor Co, in its third-quarter earnings report on Wednesday, said vehicle sales in China, where it lost $378 million in the quarter, fell 43 percent in September from a year earlier and are down 30 percent in the first nine months of the year. Ford blames its weak China business on an aging model lineup that is awaiting an overhaul.

"Our performance in China clearly has been disappointing. I can assure you the leadership of the company has swarmed the issue," Chief Executive Officer Jim Hackett said on the earnings call.

Jim Collins, founding partner of The Portfolio Guru, told China Daily that "investors' appetite for the mega-cap FAANGs — Facebook, Apple, Amazon, Netflix, Google — will determine whether this selloff continues".

"I think it was continued fear of the impact of higher interest rates on the US economy combined with profit-taking in big-cap tech stocks," Collins said.

Sales of new US single-family homes fell to a near two-year low in September, the latest sign that rising mortgage rates and higher prices were affecting demand for housing.

The market also was sorting out reports that potential bombs were sent to former president Barack Obama, former secretary of state Hillary Clinton and the New York headquarters of CNN.

The Federal Reserve said in its latest report on the economy that US factories have raised their prices because of tariffs.

Reuters and Bloomberg contributed to this story.

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