Breakingviews - Markets are finally getting back to basics

There are the clouds in the global picture, from the U.S.-China trade spat to signs of problems – and investor skittishness – surrounding certain emerging markets.

Yet American equity valuations are high, trade tensions and interest rates are rising, and earnings season is under way. A slump overnight slowed on Thursday, partly thanks to a tame U.S. inflation report.

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Global News -
Global stock markets tumble amid rising U.S. interest rate fears

European markets sank in early trading Thursday ahead of U.S. inflation data that may lift bond yields and possibly push interest rates higher.

Dow Jones industrials fall 700 points as U.S. stocks face worst loss in 6 months. Investors are wary of possible further U.S. interest rate hikes, which would raise the cost of corporate borrowing and weigh on economic growth. On Wednesday, U.S. President Donald Trump said the Federal Reserve “is making a mistake” with its campaign of rate increases.

Wall Street Jurnal -
Why the stock market tumbled Wednesday, ushering in its worst start to a quarter in about 2 years

In the first eight sessions of the fourth quarter, the Nasdaq is down nearly 8%, which would represent its worst start to a quarter since the first three months of 2016 and the worst start to a fourth quarter since 2008, according to Dow Jones Market Data.

Escalating costs of borrowing have had a more pronounced effect on megacapitalization companies like Amazon.com Inc. AMZN, -6.15%  and Netflix Inc. NFLX, -8.38% , part of a cadre of so-called FANG constituents (also including Google-parent Alphabet Inc. GOOGL, -4.63% and Facebook Inc. FB, -4.13% ), which have had an outsize influence on the broader market by dint of their market values.

Wall Street Jurnal -
Global markets tumble; U.S. stock futures point to continued selloff on Wall Street

Global stocks were under pressure Thursday, with U.S. stock-index futures pointing to continued selling on the heels of a more than 800-point plunge for the Dow industrials a day earlier.

European stock futures indicated sharp losses across the board, with FTSE 100 futures dropping 1.4%, and Stoxx Europe 600 futures down 0.8%. Across other assets, West Texas Intermediate crude oil prices CLX8, -1.33% slumped 1.6% to $71.97 a barrel, while gold GCZ8, +0.38% was up about 0.3% to $1,196 an ounce.

Wall Street Jurnal -
Trump Takes Swipe at Fed as Stocks Tumble

“The Fed is making a mistake,” Mr. Trump told reporters in Erie, Pa., after stock markets suffered their biggest decline in more than seven months. “I think the Fed has gone crazy.”

Mr. Trump has for weeks grumbled about the central bank’s campaign to gradually lift short-term rates, which the Fed has been doing to guard against inflation and economic overheating.

Wall Street Jurnal -
Quickening Retreat From Tech Sinks Market

U.S. stocks suffered their biggest decline in more than seven months Wednesday, as investors accelerated their retreat from fast-growing technology stocks in favor of shares that have been overlooked.

Possibly exacerbating the decline for tech stocks is the absence of one of their biggest buyers: the companies themselves. In the weeks leading up to reporting their corporate results, companies typically don’t repurchase their own shares due to regulations.

Wall Street Jurnal -
The Titanic as ‘an iceberg loomed’ is how Guggenheim’s Minerd thinks of today’s stock market

“Just as an iceberg loomed in the distant darkness to be struck by the Titanic under full steam, so the US economy approaches the distant fiscal drag of 2020 under the full steam of rate increases to contain inflation and an overheating labor market,” wrote Minerd, in a colorful and dramatic tweet.

Scott Minerd of Guggenheim Partners on Wednesday reiterated a warning that a one-two punch of pending rate increases by the Federal Reserve and a corporate-tax-cut-fueled fiscal deficit would ultimately upend the stock market’s bull run.

Wall Street Jurnal -
U.S. Stocks Slide as Bond Yields Keep Climbing

U.S. stocks dropped sharply Wednesday as an ongoing surge in Treasury yields pulled the Dow Jones Industrial Average down about 400 points and put the S&P 500 on pace for its longest losing streak in nearly two years.

Fast-rising bond yields and signs of inflation have spooked investors that profit margins could narrow, sparking one of the biggest downturns of the year among shares of fast-growing companies that have benefited from a decade of near-zero interest rates.

Wall Street Jurnal -
S&P 500 in 2018 will likely gain just half of its 2017 return

The Dow Jones Industrial Average DJIA, +0.15%  has lost more than 500 points since last Wednesday and the S&P 500 SPX, -0.04%  is down more than 60 points, or 2%.

As you can see, the yield on the 10-year Treasury has jumped 32% so far this year, while the S&P 500 has gained about 6%, which means we’re on pace for a sub-10% advance in 2018.

“Four hostile newspapers are more to be feared than a thousand bayonets...” ― Napoléon Bonaparte