Wall Street stocks this week suffered one of the worst weeks of the year, as global growth fears overwhelmed some positive economic news and pushed the Dow into negative territory for the year.
The Dow Jones Industrial Average lost 465.59 points (2.74 percent) to close at 16,544.10, leaving the index about 30 points below last year’s closing level, while the losses in the other two leading indices were even bigger. The broad-based S&P 500 fell 61.77 points (3.14 percent) to 1,906.13, while the tech-rich NASDAQ Composite Index tumbled 199.38 (4.45 percent) to 4,276.24.
All three indices have now dropped three weeks in a row.
Investors are rethinking the perception that the US’ mostly steady economic improvement makes Wall Street a solid bet for investors as other regions struggle.
“This week’s action indicates that a lot of investors realized that no equity market is truly decoupled from the others,” said Sam Stovall, chief investment strategist at S&P Capital IQ. “This week, people were saying: ‘Yes, the US might be doing better than the rest of the world, but if Europe falls into recession, that could drag the US down with it.’”
This week, the outlook worsened significantly for Germany, Europe’s biggest economy and the traditional driver of eurozone growth. Official data showed a massive 5.8 percent drop in German exports in August and a 4 percent decline in industrial output. Leading German think tanks also slashed their growth forecasts for the eurozone’s biggest economy.
“The German economy is stagnating and there’s no indication for the moment that will change before the end of the year,” said Ferdinand Fichtner, an economist at Berlin think tank DIW.
The IMF trimmed its global growth forecast for this year to 3.3 percent, down 0.1 percentage point from July, as it warned of stagnation in advanced economies and highlighted risks from the Russia-Ukraine crisis, strife in the Middle East and the Ebola breakout.
The IMF did raise its outlook for the US, but warned the world’s No. 1 economy could still be dragged down by weak growth elsewhere.
US stocks did enjoy one bright run on Wednesday, after minutes from the US Federal Reserve’s monetary policy meeting last month suggested the central bank would keep near-zero interest rates for some time. Policymakers indicated rising concern about slow growth in Europe and the stronger dollar.
Some earnings reports were also positive. Aluminum producer Alcoa Inc, which unofficially kicks off earnings season, reported third-quarter earnings of US$149 million, about six times the US$24 million seen in the same period last year.
PepsiCo raised its outlook for this year’s adjusted earnings growth from 8 percent to 9 percent and posted third-quarter profits that bested expectations.
Yet investors seemed more moved by the outlook of semiconductor firm Microchip Technology Inc, which sharply cut its sales outlook and predicted an industry-wide correction. The dreary outlook spurred a major sell-off in semiconductor firms and a broader technology retreat on Friday that was largely responsible for the NASDAQ’s 2.3 percent decline in the session.
Earnings season picks up considerably next week with reports from leading banks like JPMorgan Chase and Citigroup Inc, and from big technology companies including Google Inc and Intel Corp. The agenda also includes some closely watched economic reports, such as retail sales for last month, as well as the Fed’s Beige Book.
The global selloff that sent the S&P 500 to its biggest weekly drop in two years wiped US$70.2 billion off the collective worth of the world’s 400 richest people.
Hedge fund billionaires suffered some of the biggest losses, with John Paulson, founder of New York-based Paulson & Co, losing US$1.5 billion after his funds declined as much as 11 percent last month.
Elon Musk lost US$755 million after his Tesla Motors Inc fell the most in three weeks on Friday after unveiling an all-wheel-drive Model S and driver-assisting tools.
Musk is the 98th-richest person in the world, according to the Bloomberg Billionaires Index, with a net worth of US$11.2 billion.
Bill Gates remains the world’s richest person with a net worth of US$81.8 billion. The 58-year-old Microsoft Corp cofounder dropped US$2.8 billion this week as the Redmond, Washington-based software maker tumbled 4.5 percent.
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