Stocks Plunge On Worries Over Trade, Rising Interest Rates

14 hours ago
Originally published on October 11, 2018 10:14 am
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Stock prices had their worst day since February on Wednesday, with the Dow Jones Industrial Average losing more than 3.1 percent of its value. And the sell-off continued today in international markets. Stocks were down in Asia and Europe, and China's most important index fell by more than 5 percent. As NPR's Jim Zarroli reports, investors are coming to grips with rising interest rates and worries about the trade fight with China.

JIM ZARROLI, BYLINE: Prices were down for much of the day. Then late in the afternoon, they seemed to fall off a cliff, with tech stocks such as Facebook and Amazon hit especially hard. Among the catalysts was a profit warning from specialty chemicals company PPG Industries, which said it was being hurt by higher costs and softer demand in China. Scott Anderson, chief economist at Bank of the West, says investors are realizing the trade fight with Beijing won't end soon.

SCOTT ANDERSON: Given the rhetoric we're hearing on both sides between the U.S. and China, it looks like both sides are settling in for a long-term trade fight here.

ZARROLI: Among the big losers yesterday were Boeing and Caterpillar, which do a lot of exporting. But yesterday's route had other causes as well. Jack Ablin, chief investment officer at Cresset Wealth Advisors, says in recent years, the Federal Reserve and other central banks have kept interest rates low. Now they're rising again.

JACK ABLIN: It will mean mortgage rates that are up, financing costs that are up. So it will take some of the boost that we've had in the economy and tone it down.

ZARROLI: And Ablin says it will probably take a while before interest rates find their natural level. So expect them to keep rising.

ABLIN: I view this as really part of this movement in these tectonic plates that are going on underneath the surface.

ZARROLI: Ablin says there are other reasons stocks are falling, such as uncertainty about the midterms and what they will mean for President Trump's economic agenda. The good news, he says, is that the economy remains basically healthy overall. That is the message that Trump himself is trying to send.

After yesterday's big drop in prices, the White House put out a statement saying the economic fundamentals are incredibly strong. And it said President Trump's economic policies have created a solid base for continued growth. Trump also once again attacked the Fed for raising interest rates, saying, I think the Fed has gone crazy. Jim Zarroli, NPR News, New York.

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