Dow Jones industrials sink 700 points as bond yields rise

New York City. With bond prices dropping interest rates have been surging resulting in the Dow Jones Industrials Average falling over 200 poin

Here are five things to watch ahead of Thursday's USA open.

The biggest driver for the market over the last week has been interest rates, which began spurting higher after several encouraging reports on the economy. Futures point to a 0.5% fall for the S&P 500, a 0.5% decline for the Dow Jones Industrial Average and a 0.7% drop for Nasdaq.

What will fall hardest?

USA stock exchanges recorded biggest losses in 8 months as rising interest rates made investors flee risky stocks.

Wall Street stocks plunged Wednesday, with major indices losing more than three percent in a selloff prompted by the sudden jump in US interest rates.

The S&P 500 shed 1.53% to 2,839.43, on track for its steepest loss since June.

Innes, the Singapore-based head of Head of Trading for Asia Pacific with OANDA, attributed the slide to a combination of factors, including the possibility further interest rate hikes and the battle over tariffs between the USA and China.

Asian markets tumbled on Thursday, after Wall Street slumped on a heavy selling of technology and internet stocks.

The benchmark Dow index fell 831 points to close at 25,598.74 on Wednesday, wiping out 3.2 percent of its value in the sharpest drop since February.

So bond yields, the return an investor realizes by owning a bond, move in the opposite direction of prices.

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The 10-year Treasury yield remained at 3.20 per cent, about where it was late on Tuesday, after earlier touching 3.24 per cent. Technology companies were among the losers, with the Nasdaq Composite dropping more than 2% to 7,575.34. In 1987, stocks dropped more than 20 percent on a single day-Black Monday, Oct. 19-after a strong rally crashed into the Persian Gulf turmoil and trade deficits.

"The speed of changes in bond yields often matters more for equities than the level", Goldman Sachs strategists said in a note.

Globally, France's CAC 40 dropped 1 per cent and the DAX in Germany lost 0.6 per cent. Britain's FTSE 100 sank 1.3 per cent.

Rising costs, as inflation and borrowing rates pick up, could also be a worry for stock markets.

Japan's Nikkei 225 added 0.2 per cent, South Korea's Kospi dropped 1.1 per cent and the Hang Seng in Hong Kong gained 0.1 per cent.

Oil prices slumped to two-week lows as global stock markets fell, with investor sentiment made more bearish by an industry report showing USA crude inventories rising more than expected.

"That suggests the Fed will keep raising rates, and that's taking the wind out of the stocks that have done the most, particularly in the tech sector". Heating oil fell 1.2 per cent to $2.39 a gallon.

The Japanese yen strengthened 0.01 per cent versus the greenback at 112.29.

Shares in upscale jewellery retailer Tiffany & Co and perfume maker Estee Lauder both fell 7 percent after a warning from French luxury goods firm LVMH about softening demand in China.

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