Concerns about the global economy and company
earnings in the United States, as well as turmoil in emerging markets,
led major indexes to their worst month in two years.
January Ends With Another Decline on Wall Street
Investors were hit from all sides in January.
Concerns
about the global economy and company earnings in the United States, as
well as turmoil in emerging markets, led major indexes to their worst
month in two years.
However,
many remain hopeful that the problems in January will not spill over
into the rest of 2014. They even see the month’s downturn as healthy,
given the market’s torrid 30 percent rise last year.
The
Dow Jones industrial average fell 5.3 percent in January, the worst
start to a year since 2009. The Standard & Poor’s 500-stock index
fell 3.6 percent in January, and the Nasdaq composite fell 2 percent.
Many
investors expected 2014 to be more muddled and volatile, looking for
additional pullbacks and possibly a drop of at least 10 percent in one
of the market indexes, known as a correction.
“People
did look at these stock market valuations at the beginning of the year
with a degree of nervousness,” said David Kelly, chief market strategist
at J. P. Morgan Funds. “A correction would probably be healthy for the
market.”
Even
so, many investors were surprised by January’s turbulence. With one
exception, the Dow had triple-digit moves every trading day in January.
Investors
point to the December jobs report, released on Jan. 10, as a starting
point for the recent troubles. The government said then that employers
created only 74,000 jobs in December, the worst month for job creation
since 2011 and far below expectations. Up until that point, weeks of
data showed that the economic recovery was accelerating.
“It set a negative tone for the market,” Mr. Kelly said.
Other
economic reports also painted a picture of growth possibly flattening
out instead of accelerating. Added to these worries were mixed signals
from companies in the United States. Half of the members of the
S.&P. 500 have reported, and while fourth-quarter corporate earnings
are up a respectable 7.9 percent from a year earlier, companies have
been cutting their full-year outlooks and reporting weaker sales,
according to the data provider FactSet.
Then
there are concerns about overseas markets. In China, the world’s
second-largest economy, a recent report showed that manufacturing
activity unexpectedly contracted in January. Then came the currency
troubles in smaller emerging markets, particularly Argentina, South
Africa and Turkey.
On
Friday, the Dow Jones industrial average fell 149.76 points, or 0.94
percent, to 15,698.85. The S.&P. 500 dropped 11.60 points, or 0.65
percent, to 1,782.59, and the Nasdaq lost 19.25 points, or 0.47 percent,
to 4,103.88.
In
bond trading, the price of the benchmark 10-year Treasury note rose
14/32 to 100 29/32, and its yield fell to 2.65 percent from 2.69 percent
late Thursday.
Investors
should not panic yet, money managers say. More opportunities for good
news abound, including next week’s jobs report for January, and another
93 members of the S.&P. 500 are scheduled to report earnings.
“A
5 percent decline in equities is not an earth-shattering event by any
measure, particularly after last year,” said Krishna Memani, chief
investment officer at Oppenheimer Funds. “It’s still way too early to
give up on equities.”
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