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Australian share market expected to crash lower on Thursday

The market volatility is expected to move into overdrive on Thursday following heavy declines on Wall Street overnight.

At the time of writing the latest SPI futures are pointing to the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) opening the day 92 points or 1.6% lower this morning.

What happened?

Overnight the Dow Jones Industrial Average fell 2.4%, the S&P 500 dropped 3.1%, and the NASDAQ had its worst day in over seven years with a 4.4% decline.

The most severe selling happened in the U.S. tech sector with the FAANG stocks all falling heavily.

Facebook shares fell 5.4%, Apple shares dropped 3.4%, Amazon shares were down 5.9%, Netflix shares plunged 9.4% lower, and Alphabet (Google) shares declined 4.8%.

According to CNBC, U.S. investors were hitting the sell button in a panic after concerns over corporate earnings added to fears over the global trade war and rising bond yields.

Alec Young from FTSE Russell told the broadcaster that: “An increasingly murky macro picture is clouding the 2019 earnings outlook leaving investors to largely shrug off a solid start to the third quarter earnings season.”

Before adding: “While valuations have certainly come down in recent weeks, at 16 times forward earnings for the Russell 1000 index, they aren’t in the bargain basement by any means, especially if earnings growth slows more than expected next year.”

In addition to this, data from the U.S. Commerce Department revealed that new home sales have fallen to a two-year low. This has left investors concerned that rising rates were slowing down economic growth in the country.

What now?

The Australian share market is expected to open significantly lower on Thursday, with the tech sector likely to bear the brunt of selling.

I suspect this could mean another day to forget for shareholders of WiseTech Global Ltd (ASX: WTC)Afterpay Touch Group Ltd (ASX: APT), Altium Limited (ASX: ALU), Appen Ltd (ASX: APX), and Xero Limited (ASX: XRO).

While this could potentially create a buying opportunity for a lot of these shares, I would suggest investors let the dust settle before considering an investment.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (C shares), Amazon, Apple, Facebook, and Netflix. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool Australia owns shares of AFTERPAY T FPO, Altium, Appen Ltd, WiseTech Global, and Xero. The Motley Fool Australia has recommended Amazon, Apple, Facebook, and Netflix. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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