19/04/2015 00:25 AST
A Friday rout in global equities sent US stocks to their first weekly loss of the month, as disappointing earnings, signs of higher inflation and concerns from China to Greece curbed demand for risk assets.
The Standard & Poor’s 500 Index lost 1 per cent in the five days, ending the period with its worst drop in three weeks. While an energy rally took the gauge to within 10 points of a record Wednesday, it has now stalled short of the mark 33 straight days, the longest streak since June 2013.
Results from American Express Co. to Norfolk Southern Corp. missed estimates and the cost of living rose a third month, as the twin pillars of earnings and central-bank stimulus that have underpinned the bull market showed signs of wobbling. Chinese index futures tumbled after regulators moved to curb speculative trading and European stocks capped their worst week this year as concern grew that Greece won’t meet its debt obligations.
“It’s enough to set back a vulnerable market that’s gone absolutely ballistic,” said Mark Luschini, chief investment strategist in Philadelphia at Janney Capital Management LLC, which oversees about $68 billion. “What’s going on in the market that suggests it deserves to be at this level or move higher?”
The Dow Jones Industrial Average slumped 231.35 points, or 1.3 per cent, to 17,826.30, with all of the losses occurring Friday. The Nasdaq Composite Index sank 1.3 per cent, sliding more than 70 points in the final two sessions after topping 5,000 and approaching its dot-com-era high.
Global Slump
FTSE China A50 Index futures tumbled more than 5 per cent after regulators moved to curb stock-market speculation after the Shanghai Composite Index had rallied 6.3 per cent in the week to the highest since 2008. The slide in Asia late Friday exacerbated concern in Europe over Greece, as the country struggles to win more aid to avoid a default.
The Stoxx Europe 600 had climbed to an all-time high on Wednesday amid central-bank stimulus, before a two-day slide left it 2.2 per cent lower in the week, its worst performance this year.
“A lot of people are taking money off the table because of all of the unknowns out there,” Peter Sorrentino, a portfolio manager for Cincinnati-based Huntington Asset Advisors Inc., which oversees $1.8 billion, said by phone. “Nobody wants to be heroic at this point.”
Near records
The S&P500 and Dow average last hit records on March 2, the same day the Nasdaq topped 5,000 for the first time since March 2000. The benchmark gauge has struggled to regain that level amid two drops of more than 2.5 per cent. Over the last year, the S&P500 has averaged just eight days between highs.
Weaker-than-forecast reports on industrial output and retail sales in the week contributed to a recent string of mixed economic data that has raised concern a strong dollar and cheap oil are rippling through the economy. While Friday’s report on consumer prices eased worries about a slowdown, it bolstered the case for higher borrowing costs.
Meanwhile, investors looking to earnings reports for signs of strength in corporate America weren’t left with a clear picture. American Express tumbled 2.9 per cent to the lowest since 2013 after reporting revenue that fell short of estimates. Norfolk Southern’s results missed targets, and the stock’s 5.4 per cent slide dragged industrial shares in the S&P500 to a 2.2 per cent loss, most among 10 main groups.
Analysts surveyed by Bloomberg predict a 4.3 per cent decline in first-quarter results that would be the first retreat since 2009.
Bloomberg
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