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Wall Street slumps to 2018 lows, Nasdaq erases 3%

  • Three major indexes pare early gains, suffer heavy losses.
  • Communication Services and Technology lead losses.
  • Threat of government shutdown weighs on sentiment.

After going up more than 1% in the early trade, major equity indexes lost traction and closed the day in their lowest level of the year as concerns over a government shutdown and worries about a possible economic slowdown weighed on the market sentiment. The CBOE Volatility Index, Wall Street's fear gauge, rose more than 5% on Friday and touched the 30 mark for the first time since February.

Earlier in the day, President Trump told reporters that there was a very good chance the government funding bill would get voted down in the Senate and added that they were ready for a "very long shutdown." Commenting on the market's reaction, "I think it's a confluence of all the known issues that the investors have been digesting for the last few weeks. We have the prospect of a government shutdown today. We have more shake ups within the Trump administration," Mike Loewengart, vice-president of investment strategy at E*TRADE Financial in New York, told Reuters.

The risk-sensitive sectors S&P 500 Communication Services and the S&P 500 Technology lost around 3% on the day. Additionally, the barrel of WTI closed the week below the $46 mark for the first time since July 2017 and the S&P 500 Energy Index dropped more than 1%.

The Dow Jones Industrial Average lost 416.09 points, or 1.82%, to 22,443.51, the S&P 500 erased 50.8 points, or 2.06%, to 2,416.62 and the Nasdaq Composite fell 195.41 points, or 3%, to 6,333.00. For the week, these three indexes dropped 6.87%, 7.05%, and 8.36%, respectively. Both the Dow Jones Industrial Average and the Nasdaq recorded their largest weekly percentage losses in nearly ten years.

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