Stocks fell steeply at the market open and investors face another challenging day as Wall Street braced for the Standard & Poor's 500 stock indexes' first negative January since 2010, a poor start that history says could bode ill for the remainder of the year.
The sharp drop in stocks comes as investors seek out safety.
Money is piling into long-term U.S. Treasury bonds: Prices on the 10-year Treasury are rising, and yields, which move in the opposite direction, have declined to 2.65%. That's a level last seen in early November, when the closing yield was 2.61%, according to Yahoo Finance data.
At the start of the year, the yield was 3.03% and Wall Street was betting it would move higher, not lower, as U.S. economic growth picks up and asset purchases from the Federal Reserve decline.
Investors were also reacting to a troubling weaker-than-expected inflation reading in the eurozone that raised fears of deflation, as well as ongoing angst related to the ongoing turbulence in emerging markets.
Shortly after the market open, the Dow Jones industrial average was down more than 200 points, or 1.4%, the S&P 500 off 1.2% and the Nasdaq composite was 1.1% lower.
The slow start to January, which often serves as a barometer of how stocks trade for the entire year, is the newest worry for Wall Street, which has run into selling pressure in 2014 amid turbulence in emerging markets. When the first month of the year is negative the chances of finishing the full year in the plus column drop to roughly 50-50, according to the Stock Trader's Almanac.
Wall Street is also grappling with renewed worries related to the eurozone. Consumer inflation in the 18-country eurozone dropped to 0.7% in December, below its previous monthly reading of 0.8% and below analysts' estimate of 0.9%. The record low readings on consumer prices there raised fears that a period of falling prices, or deflation, might be taking hold. If deflation persists it would be negative for Europe's economy, as shoppers often hold off on purchases in an effort to get things at lower prices at a later date.
CONSUMER SPENDING: Up 0.4% in December
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A big earnings miss by online retailer Amazon.com after Thursday's close could also be weighing on investor sentiment. Investors are expecting earnings Friday from oil giant Chevron and credit card processor MasterCard.
Heading into Friday's session, the Dow was down 4.4% in January, the S&P 500 was off 2.9% and the Nasdaq composite was down 1.28%.
The S&P 500 closed Thursday at 1,794.19 and a key level to watch on the downside is around 1,770, says Bryan Sapp, senior trading analyst at Schaeffer's Investment Research.
"The 1,770 level on the S&P 500 has held (so far), and it looks like it could provide some support for the market," Sapp told clients in a early morning research note. "Meanwhile, the index rallied right up near the round-number 1,800 level yesterday, but retreated on an intraday basis. Going forward, the bulls will want to see this area taken out, as it could be a sign that the market is ready to resume its longer-term uptrend."
Financial markets are closed in China, Hong Kong, South Korea, Taiwan, Indonesia, Singapore, Malaysia and the Philippines for the Lunar New Year holidays. Japan's Nikkei index dropped 0.6% to 14,914.53.
European benchmarks were trading firmly lower. Germany's DAX index led decliners with a drop of 1.5%, while London's FTSE was off 1.1% and Paris' CAC 40 was off 1.1%.
U.S. stocks rose sharply Thursday as investors cheered the strong earnings and data that showed the U.S. economy grew at a robust annual rate of 3.2% in the fourth quarter. The S&P 500 rose 19.99 points, or 1.1%, to 1,794.19. The Nasdaq composite jumped 71.69 points, or 1.8%, to 4,123.13 and the Dow Jones industrial average rose 109.82 points, or 0.7%, to 15,848.61.
Benchmark U.S crude for March delivery was down 38 cents at $97.85 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained 87 cents to finish Thursday at $98.23, boosted by the GDP report.
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