Another soft day of trading is expected on the New Zealand sharemarket today after the US markets dipped again overnight.
The S&P500 has closed down 2.06 per cent on 2,728.37 points while the Dow Jones Industrial Average closed down 2.13 per cent to 25,052.83 points.
While the market is down it is a smaller fall than the previous day which saw the S&P 500 slip 3.3 per cent and the Dow Jones drop around 800 points or around 4.4 per cent.
That means the market has lost over 1200 points in the last two days.
It also had a local effect, with the S&P/NZX50 close down 3.64 per cent yesterday.
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Shane Solly, a portfolio manager at Harbour Asset Management, said it was reasonable to expect that New Zealand would see a bit more of this choppiness.
"We are going to see another day of softness in New Zealand," he predicted.
But Solly said he didn't believe it would be as bad as yesterday's drop which hovered around 2.5 per cent before dropping another 1 per cent in the last hour of trading.
The S&P/NZX50 has now fallen 6.7 per cent since the end of September but is still in the positive for this year - up 3.85 per cent since the last day of trading in 2017.
Solly said people needed to be aware that New Zealand had been one of the stand-out markets of the lot and that had attracted a lot of new capital from overseas.
The flows of new capital may stop for a while and some existing investments may be pulled out as capital looks to go elsewhere, he said.
While the market falls would be felt in people's KiwiSaver balances Solly said it was only a problem if someone was about to retire or was already retired and they sold up and crystallised the falls.
The fall in the US markets has been caused by rising bond yields and concerns about the trade war between the US and China.
But Solly said some balancing factors were starting to kick in that was easing the pressure in some parts.
He said the US 10 year bond yield had fallen to 3.14 per cent coming off a recent peak of 3.26 per cent.
"That has potentially taken a bit of pressure off."
While the price of oil had also dropped from US$76.40 on October 3 to US$71 which would help ease inflation pressure.
Solly said people had got too used to low levels of volatility but rises and falls of 1 per cent to 2 per cent within a day were a return to more normal levels.
"This surprise jump has been a bit of a surprise for people."
Solly said it was mainly private individuals selling as well as algorithm driven exchange traded funds which had to follow wherever the market went.
"When the market turns down they sell."
The market falls come at a time when there is not much corporate news and in the school holidays when there was often lower levels of trading.
"The school holidays create a vacuum. The robots are selling into nobody."
US stocks tumble again
US stocks tumbled a second day, with major averages notching wild swings in heavy volume. US Treasuries surged after a strong 30-year auction, the dollar fell with oil, and gold, that traditional safe haven, posted its biggest gain in more than two years.
The S&P 500 Index fell more than 2 per cent for a second straight day and is now in its longest slide since 2016. The Dow Jones Industrial Average dropped more than 500 points. Tech shares that bore the brunt of the selling Wednesday fared relatively better Thursday, though the Nasdaq 100 Index's losses from an August record reached 8 per cent.
"All of a sudden, you got that severe downturn because the results of the 30-year note auction were better than expected and people said 'We're going to shift now'," said Donald Selkin, chief market strategist at Newbridge Securities.
"It was asset allocation, it was a plunge. That's unusual. That's not a normal rate of decline. That's an accelerated rate of decline. It was an algorithm on the asset allocation because it took place after the bond auction which was better than expected."
The S&P 500 is at a three-month low after a 6 per cent slide in what's the longest slump of Donald Trump's presidency. Energy shares bore the brunt of selling after oil plunged by more than 3 per cent. Financial firms also contributed heavily to the losses, with banks and insurers down at least 2.5 per cent. The tech-heavy Nasdaq 100 surrendered an earlier rally and added to its 4.4 per cent decline on Wednesday. Trading was heavy with volume surging roughly 65 per cent above average for this time over the past 30 days.
"This is just a normal run-of-the-mill correction that happens to be concentrated in some of the more expensive and most notable names in technology," said Jamie Cox, managing partner at Harris Financial Group. "But I think it's been precipitated by the uncertainty about global growth and whether or not Fed policy is going too far too fast."
In addition to energy, insurers and household products manufacturers weighed on the market, while media companies and software makers were among the few bright spots. The Cboe Volatility Index rose to its highest level since February.
"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 per cent and Taiwan's technology-heavy benchmark plummeted more than 6 per cent. Europe's main equity index fell to the lowest since December 2016. The euro and the pound both advanced.
Investors seeking to pinpoint the cause of the equities rout have no shortage of culprits to choose from. US companies are increasingly fretting the impact of the burgeoning trade war, while the same issue prompted the International Monetary Fund to dial down global growth expectations. And in the tech sector, which was a key driver of the rally that pushed American equities to a record just a month ago, expensive-looking companies have been roiled by a hacking scandal.
Against this backdrop, the Federal Reserve has been trimming its balance sheet and raising interest rates, provoking Trump's ire and helping to force a repricing of riskier assets.
Elsewhere, West Texas Intermediate crude tumbled below US$71 a barrel amid a broad decline in commodities as OPEC cut estimates for demand. Precious metals gained with gold. A Bloomberg index of cryptocurrencies dropped 10 per cent.
- Additional reporting via Washington Post