New Zealand's share market has fallen sharply after the Dow Jones industrial average dove more than 600 points Wednesday as another wave of volatility swept through US financial markets.

The NZX50 benchmark index had slipped by 1.68 per cent as of midday.

It has dropped from 9,327 points at the beginning of the month to 8,497 so far today in what has been dubbed Red October.

The index is down more than 9 per cent since the recent high hit on September 21 putting it close to correction territory which is officially named once a market has fallen 10 per cent in a short space of time.

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But it remains above where it started the beginning of the year meaning investors will still have made some gains this year.

In today's trading, the Dow bobbed in the red most of the session, dragged down by a weak housing report and a beleaguered technology sector.

The tech-heavy Nasdaq took the steepest losses of the day, down 4.4 per cent. It's now in correction territory, down 11.4 per cent from its September 2018 high, according to Bespoke Investment Group.

The sell-off in tech capped a horrendous month for the darlings of Silicon Valley, with painful losses in share value on Wednesday: Netflix lost 9.4 per cent. Facebook lost 5.4 per cent. Amazon, 6 per cent. Apple, 3.4 per cent.

The Dow's drop was a sharp reversal from its upward momentum as trading opened that came off of a strong earnings report from aircraft maker Boeing. By day's end, it had wiped out all of its 2018 gains, falling 606 points, or 2.4 per cent, to close at 24,584.50. The Dow is looking at its worst month in eight years.

The Standard & Poor's 500-stock index was off 3 per cent Wednesday.

"This could be a bull market correction or something more serious," said Michael Farr, an investment manager in Washington. "This drop is coming out of technology."

Some Wall Street experts said the steep sell-off in the last hour of trading was a scramble by sellers who are looking beyond this year and toward more modest earnings in 2019 - in the neighbourhood of 5 per cent growth instead of 20 per cent.

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They are also unnerved at the slowdown in the Chinese economy, the strong U.S. dollar and other global menaces such as a looming Italian financial crisis, U.S. tensions with Saudi Arabia and the latest domestic crisis involving a series of homemade bombs sent this week to the Clintons, Obamas and CNN.

Investors are closely watching other signals, too, including new inflationary concerns over tariffs and the Federal Reserve's interest rate increases, which are coming under heavy criticism from President Donald Trump.

In a Wall Street Journal interview published Wednesday morning, Trump took aim at the Fed chair he appointed, Jerome Powell: "I'm not happy with what he's doing at all."

"He was supposed to be a low-interest-rate guy," the president said. "It turned out he's not."

"One loyal follower of our research suggested that perhaps the market is spooked about the mixed-up mix of U.S. fiscal, monetary, trade, and foreign policies," according to Ed Yardeni, president of Yardeni Research. "I've recently been describing them as akin to driving a car with one foot pushing hard on the accelerator while the other is tapping on the brakes."

Dow member AT&T fell short of third-quarter profit expectations Wednesday, which pushed its share price down nearly 7 per cent and added to worries about the tech sector. The semiconductor industry also has shown weakness. Texas Instruments, an industry leader, offered guidance that demand is waning. The losses fueled fears that the sector that has powered the current bull market is played out.

The energy sector was also a heavy drag, dropping 3.8 per cent on the day. Energy is the poorest performing sector in the last five sessions, down 8.6 per cent.

A weakening Chinese economy has combined with an upcoming U.S. election to cast an air of uncertainty over markets.

The markets are in the midst of one of the busiest earnings weeks of the year, with major blue chips including Microsoft, Visa, Tesla, UPS and Ford all reporting Wednesday.

Nancy Tengler, chief investment officer for Heartland Financial USA, said several things are at work driving down prices, one of which is the lack of buyers jumping into the market to scoop up deals on stocks.

Some of those buyers are the companies themselves.

After enjoying an extended strong run, major stocks have been hit hard in the last 12 months. Photo/Getty Images.
After enjoying an extended strong run, major stocks have been hit hard in the last 12 months. Photo/Getty Images.

"You have all these buybacks, but right now is a blackout period, so these great companies and insiders can't buy their own shares," Tengler said. "There's no offsetting buyer. So when the algorithms drive the sell programs, it feeds on itself. The same thing happened when the market dropped in January."

The market's shakiness comes despite the fact that many companies have beat earnings this quarter. But the projected earnings growth has slowed in big blue chips like 3M and Caterpillar, whose outlook for modest expectations through the end of the year rattled the markets Tuesday. The Dow dropped nearly 500 points Tuesday before climbing back in the afternoon. It closed down more than 100 points.

Tenlger said current sell-off will likely end in a 10 per cent correction prior to the upcoming mid-term elections.

"After the elections, the buybacks will be allowed and kick in," she said. "We will see a bounce between then and the end of the year."

There's another possibility for the pullback, said Brad McMillan, chief investment officer for Commonwealth Financial Network.

He put it this way: "Now we are starting to get into an area that suggests confidence itself in the market may be the reason."

- Washington Post