Wall Street bled on Friday, with the S&P 500 sinking to its lowest level since October 2014 as oil prices sank below $30 per barrel and fears grew about economic trouble in China.
Pain was dealt widely, with the day’s trading volume unusually high and more than a fifth of S&P 500 stocks touching 52-week lows. The major S&P sectors all ended sharply lower. The Russell 2000 small-cap index dropped as much as 3.5 percent to its lowest level since July 2013.
The energy sector dropped 2.87 percent as oil prices fell 6.5 percent, in part due to fears of slow economic growth in China, where major stock indexes also slumped overnight. The energy sector has lost nearly half of its value after hitting record highs in late 2014.
“Initially when oil was down, the convenient line was ‘Well, it’s good for the other nine sectors,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma. “That tune has changed. Now, it’s a contagion to the other nine sectors. It’s a contagion to Main Street and Wall Street.”
The technology sector was the day’s biggest loser, sliding 3.15 percent as weak quarterly results from chipmaker Intel weighed heavily on chip stocks.
The S&P 500 has fallen about 12 percent from its high in May, pushing it into what is generally considered “correction territory.”
China’s major stock indexes shed over 3 percent, raising questions about Beijing’s ability to halt a sell-off that has now reached 18 percent since the beginning of the year.
The Dow Jones industrial average dropped 2.39 percent to end at 15,988.08 points and the S&P 500 fell 2.16 percent to 1,880.29.
The Nasdaq Composite lost 2.74 percent to 4,488.42.
For the week, the Dow fell 2.2 percent, the S&P 500 lost 2.2 percent and the Nasdaq dropped 3.3 percent.
During Friday’s session, the CBOE volatility index, Wall Street’s fear gauge, jumped as much as 29.2 percent to 30.95, its highest level since September.
“Investors are scared to death, and the fact that it’s happening at the beginning of the year has some historical significance,” said Phil Orlando, chief equity market strategist at Federated Investors in New York.
U.S. economic data on Friday was not very encouraging either, with an unexpected drop in retail sales and industrial output declining again in December, underscoring a worsening outlook for fourth-quarter economic growth.
Dow components Exxon and Chevron were down more than 1 percent, while Caterpillar dropped 2.65 percent.
Intel tumbled 9.1 percent, its steepest drop in seven years, after the chipmaker’s results and forecast raised concerns about its growth.
Citigroup fell 6.41 percent, while Wells Fargo dropped 3.59 percent after both reported largely in-line quarterly earnings.
Wynn Resorts was the among the few bright spots, surging 13.34 percent after reporting in-line quarterly revenue.
Declining issues outnumbered advancing ones on the NYSE by 2,591 to 529. On the Nasdaq, 2,377 issues fell and 502 rose.
The S&P 500 index showed no new 52-week highs and 135 new lows, while the Nasdaq recorded five new highs and 511 lows.
About 10.8 billion shares changed hands on U.S. exchanges, well above the 7.6 billion daily average for the past 20 trading days, according to Thomson Reuters data.
With markets from Asia to Europe entering bear markets this month, stocks worldwide have lost more than $14 trillion, or 20 percent, in value from a record last June amid worries over global growth and deepening oil declines. The pace of the drop has been so fast that it has already unraveled about half of the rally since a low in 2011.
And here is a bonus chart from Bank of America, which looks at the S&P on an equal weighted basis, to avoid such aberrations as the collapsing market breadth phenomenon, also known as FANG. Spot the symmetry.
Something tells me Pyongyang might be overselling this a wee bit. North Korea’s mission to the United Nations bragged about successfully building a hydrogen bomb, which they say has the capability of “wiping out the whole territory of the US.” They argue that they need this capability to fend off an attack by the US.
Well, maybe they have an H-bomb, but maybe they don’t:
North Korea’s U.N. mission claimed Wednesday that its successful nuclear bomb test showed that it could now “wipe out” the United States, as the U.N. Security Council grappled with a response to the underground blast.
North Korea called it a hydrogen bomb and said the test “scientifically proved the power of the smaller H-bomb,” though the United States and others expressed skepticism that Pyongyang actually tested a hydrogen bomb for the first time. Nonetheless, whatever the North detonated underground will likely push the country closer toward a fully functional nuclear arsenal, which it still is not thought to have. …
North Korea’s U.N. mission circulated a report from the country’s news agency saying the Jan. 6 test wasn’t to “threaten” or “provoke” anyone but was indispensable to build a nuclear force “to cope with the U.S. ever-more undisguised hostile policy” toward the Democratic People’s Republic of Korea, the country’s official name.
It said North Korean scientists and technicians “are in high spirit to detonate H-bombs … capable of wiping out the whole territory of the U.S. all at once as it persistently moves to stifle the DPRK.”
The increased threat for now might not be an H-bomb, but that the test advanced Pyongyang’s technology in miniaturization. That would make their missiles capable of delivering nuclear weapons, which at the moment the Kim regime can’t do. In that case, their throw distance isn’t a threat to the US as much as it is a real threat isn’t to Japan. North Korea’s missiles can easily reach their long-term nemesis already, and Japan might not want to wait until the Kim regime can successfully arm a missile with a nuclear warhead.
The UN is expected to add more sanctions to the long list already imposed on the DPRK. Kim Jong-un’s father used these provocations to get concessions, but this time it looks as if the new Dear Leader is going out of his way to provoke tougher conditions on his country. That’s curious, and it will be interesting to see whether the UN accommodates that — or backs down.
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