October 18, 2018

Dow drops 300 points after Mnuchin backs out of Saudi summit

The jittery stock market is once again heading south.

The Dow lost as many as 392 points, or 1.5%, on Thursday, with selling accelerating after Treasury Secretary Steven Mnuchin backed out of a conference in Saudi Arabia. The index was recently down about 275 points.

Tech stocks fell sharply, sending the Nasdaq tumbling about 1.5%. Netflix declined 3%, while Facebook and Alphabet lost about 2% apiece.

Stock market volatility is back on Wall Street. Fears about rising bond yields and the US-China trade war sparked heavy selling last week, the worst for all three major indexes since March. Stocks rebounded sharply on Tuesday, before another wobbly session on Wednesday. The CNN Business Fear & Greed Index of market sentiment is flashing "extreme greed."

The Dow hit session lows on Thursday after Mnuchin tweeted that he, President Donald Trump and Secretary of State Mike Pompeo decided not to participate in the Saudi summit.

The news adds to rising global uncertainties, including concerns about Italy's budget and a plunge in China's stock market.

Mnuchin's announcement points to elevated tensions between the United States and Saudi Arabia over the disappearance of Washington Post journalist Jamal Khashoggi.

Saudi Arabia has threatened to retaliate against potential US sanctions. The kingdom is the world's largest oil exporter, giving it great sway over global energy prices. US oil prices bounced modestly on the Mnuchin news but remain down on the day.

Saudi Arabia has also played a huge role financing the rise of Silicon Valley, serving as the tech industry's unofficial banker.

But the market has also been pressured by other international developments. Even before Mnuchin's tweet, analysts pointed out that Italian bond yields spiked due to concerns about Italy's budget proposal. The European Union plans to send a formal warning letter to Rome to signal displeasure over plans to increase Italy's budget deficit, Reuters reported.

Chinese markets were also under pressure. The Shanghai Composite plunged nearly 3% overnight, falling deeper into a bear market as the US-China trade war continues to linger.

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