Wall Street falls as emerging-market concerns rise

NEW YORK Fri Jan 24, 2014 5:49pm EST

1 of 3. Traders work on the floor of the New York Stock Exchange January 24, 2014.

Credit: Reuters/Brendan McDermid

NEW YORK (Reuters) - Stocks dropped for a second day on Friday and the S&P 500 posted its worst week since June 2012 as a selloff in emerging market assets fed through to wholesale pullbacks in equities.

The S&P 500 fell 2.6 percent for the week, closing below its 50-day moving average Friday for the first time since October 9, suggesting more selling may be ahead for the market that closed out 2013 with a 30-percent gain.

The day's decline was also the biggest percentage drop since June 2013 for the index, while the CBOE Volatility index .VIX rose 32 percent and registered its biggest weekly percentage gain since May 2010.

"There's definitely some nervousness. The world is suffering from the emerging markets' flu," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

Emerging market assets were hit by worries about slowing growth in China as well as political problems in Turkey, Argentina and Ukraine.

With many market participants expecting the Federal Reserve to decide next week to shave its stimulus by another $10 billion a month, investors also worried that interest rates will soon begin to rise. Fed policymakers will conclude a two-day meeting on Wednesday.

Among the 10 major S&P 500 sectors, industrials .SPLRCI fared the worst, down 3.1 percent, as General Electric Co (GE.N) lost 3.4 percent to $24.95 and Boeing Co (BA.N) fell 3.3 percent to $136.65.

The Dow Jones industrial average .DJI fell 318.24 points or 1.96 percent, to 15,879.11, the S&P 500 .SPX lost 38.17 points or 2.09 percent, to 1,790.29 and the Nasdaq Composite .IXIC dropped 90.701 points or 2.15 percent, to 4,128.173.

For the week, the Dow fell 3.5 percent and the Nasdaq fell 1.7 percent. The Dow's weekly drop was the steepest since November 2011.

However, investors were willing to pay more for protection against a drop in the S&P 500 today than three months down the road.

The last time the spread between the CBOE volatility index .VIX and three-month VIX futures turned negative was mid-October, shortly after a 4.8 percent pullback in the S&P 500 opened the door to the last leg of the 2013 market rally.

Worries over China's growth surfaced after a disappointing manufacturing number spurred the S&P 500's 0.9 percent drop on Thursday.

The Turkish lira hit a record low and the South African rand fell to five-year low against the dollar.

Argentina's government said Friday it would relax stringent foreign-exchange controls, after it abandoned its long-standing policy of intervening to support the peso currency. That resulted in the currency's steepest plunge since the 2002 financial crisis.

Going against the day's downdraft was Procter & Gamble Co (PG.N), which advanced 1.2 percent to $79.18, giving the Dow its biggest boost. The world's largest household products maker reported lower quarterly profit, but kept its 2014 sales forecast unchanged.

Volume was well above the average for the month. About 8.8 billion shares changed hands on U.S. exchanges, compared with the average of 6.6 billion so far this month, according to data from BATS Global Markets.

Decliners outnumbered advancers on the New York Stock Exchange by about 6.5 to 1 and on the Nasdaq by about 6 to 1.

(Additional reporting by Chuck Mikolajczak; Editing by Bernadette Baum, Nick Zieminski and Jan Paschal)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (11)
bertanderson wrote:
The markets still really haven’t moved very much. I don’t think investors should worry too much and should hang in to see if a really big drop occurs. I know that earnings are mediocre at best and the global situation seems to be weakening. I guess the big question is…Was the big and fast run up in stocks justified to the reality of the economy or do we need to pull back in line with true growth. You may want to take some profits off the table but I wouldn’t panic just yet. The problem is that it happens so fast on the downside that you may be on vacation or sitting in a pub somewhere have a business lunch when you hear about it. We’ve all been there and we say…Why didn’t I sell 2 weeks ago and sit in cash for a while. Now I’ve lost 25% of my portfolio and maybe more in the coming weeks.

Jan 24, 2014 8:38am EST  --  Report as abuse
Hermist wrote:
Readthe Tarot cards! All will be well1

Jan 24, 2014 2:48pm EST  --  Report as abuse
Aqvsenti wrote:
Nonsense!!! First of all logically money should flow to us from emerging- dudes, since instability is there and not here.
Second ok we will take money back from stocks and what next? buy gold again? and then what? eat gold, drive gold, wear gold, build golden houses etc…:)))

Jan 24, 2014 3:31pm EST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.