The Beginning of the End?

A gloomy October on Wall Street turned darker Thursday, as heavy selling overseas and failed intraday rallies in the U.S. sent major stock indexes to another stinging retreat.

The Dow Jones Industrial Average tumbled 546 points, leaving the blue-chip index down 5.2% after two days of volatile trading that has been marked by sharp declines in the last hours of the day. The cost of hedging against stock-price declines soared Thursday in a sign of rising anxiety, with the Cboe Volatility Index, or VIX, soaring to its highest level since the February rout that set the Dow’s intraday point-decline record.

Thursday’s downdraft was marked by the fourth-largest volume, with 11.3 billion shares changing hands, since Feb. 9, amid a sizable sell order around 2:30 p.m. that added to the downswing and had traders buzzing.

“We looked at the intraday chart and the Dow lost 300 points between 2:30 and 2:45,” wrote independent market analyst Stephen Todd in a Thursday note. The Wall Street Journal and other publications have highlighted that a number of hedge funds have been liquidating positions of late, and sharp selling — as has been the case in the past couple of days — can lead to further selling, as investors are forced to cover leveraged positions by dumping moneymaking holdings. (Worth noting is that Todd said he’s bullish on gold after Thursday’s market swing, for the first time in months.)

Late-Thursday stock trading was characterized by powerful gyrations amounting to hundreds of points that took place within minutes. The Journal reported the Dow tumbled about 240 points in the final 90 minutes of trade, representing about half of Thursday’s losses.

“Volatility is back, and it may require more active strategies on the part of investors to pursue their long-term goals,” John Lynch, chief investment strategist for LPL Financial, wrote in a note to clients Thursday. “Volatility is also not to be feared, but embraced, as varying data points will cause bouts of market anxiety. But remember that fundamentals are still strong.”

Earlier, Asian and European equities plunged as the market rout extended around the world. China’s Shanghai Composite gauge closed down more than 5 percent and Taiwan’s technology-heavy benchmark plummeted more than 6 percent. Europe’s main equity index fell to the lowest since December 2016. The euro and the pound both advanced.


Todd “Bubba” Horwitz