US stocks slide after icy January
For US investors, February is starting off even rougher than January.
US stocks tumbled yesterday, pushing the Dow Jones industrial average down more than 320 points after reports of sluggish US growth added to investor worries about the global economy.
It was the biggest one-day decline for the blue-chip index in more than seven months. And the drop followed the Dow’s worst January performance since 2009.
The market stumbled from the start, with US stocks opening lower after declines in European and Japanese indexes.
Then it quickly turned into a slide as a spate of discouraging economic data on everything from manufacturing to car sales to construction spending poured in.
By late afternoon, the sell-off accelerated further, bringing the Dow down more than 7% for the year. The S&P 500 index was down more than 5% for 2013.
Some stock watchers took the market’s decline in their stride. They considered it a necessary recalibration following the market’s record highs at the end of last year.
“It’s a bit painful for investors to see the equities markets drop as they have, but this is healthy for this market,” said Chris Gaffney, a senior market strategist at EverBank.
All told, the Dow dropped 326.05 points, or 2.1%, to close at 15,372.80, its biggest decline since June 20, 2013.
The Standard & Poor’s 500 index lost 40.70 points, or 2.3%, to 1,741.89. The Nasdaq composite dropped 106.92 points, or 2.6%, to 3,996.96.
There were signs of worry throughout the market. The VIX index, a measure of stock market volatility, rose to its highest level since December 2012.
Investors shifted into US government bonds, pushing yields lower and extending their sharp decline since the start of the year.
Staffing company Robert Half International declined the most among stocks in the S&P 500 index. CarMax and Pfizer were among the few stocks to eke out gains on the day.
Cold US weather emerged as a common problem for the economy last month.
Investors were discouraged yesterday by a private survey showing US manufacturing barely expanded last month as frigid temperatures delayed shipments of raw materials and caused some factories to shut down.
Construction spending rose modestly in December, slowing from healthy gains a month earlier.
Car makers also piled on the disappointing news, as an icy January slowed vehicle purchases.
Ford shares slipped 41 cents, or 2.7%, to 14.55 dollars, and General Motors shares fell 83 cents, or 2.3%, to 35.25 dollars after they reported a drop in US January sales, hurt by harsh weather that kept customers away from dealerships.
GM sales fell 12%, while Ford said sales fell 7%. Chrysler bucked the trend with US sales gains of 8%, and analysts still expect US car sales to reach more than 16 million this year – a return to pre-recession levels.
Fresh signs of weakness in China also weighed on the minds of investors.
An official Chinese manufacturing survey released over the weekend showed factory output grew at a slower rate in January compared with December.
The report followed an HSBC survey that showed an outright contraction in manufacturing.
Any signs of slowdown in China’s economy – the world’s second-largest – can spell bad news because it drives exports and is a key trading partner for developing countries such as South Africa and Indonesia that supply Chinese factories with raw materials.
All 10 sectors in the S&P 500 index fell, and telecommunications stocks posted the biggest declines, weighed down by AT&T and Verizon Communications.