Markets slide again, complete worst two-week start to year

Wall Street capped the first two weeks of 2016 with a steep slide on Friday that sent the Dow Jones industrial average down almost 400 points. The Nasdaq Composite lost 2.74 per cent to 4,488.42. In addition, the market has not seen the kind of sell-off in high volume that signals a capitulation, and the S&P 500 could enter a bear market, more than 9 percent below current levels. Investors already are seeing damage to US corporate profits, particularly at energy companies.

Crude oil has dropped below 30 dollars a barrel from a high of over 100 dollars during the summer of 2014, eviscerating energy company profits.

United States stock exchanges will be closed on Monday in observance of Martin Luther King Jr Day, while China’s equity markets will be open.

“Oil is the root cause of today”, said Dan Farley, regional investment strategist at the Private Client Reserve at US Bank.

“It’s very frustrating and painful day to day”, Ms. Warne said. Apache tumbled 4.6 per cent, Marathon Oil 10.3 per cent and Transocean 6.5 per cent. On Friday it surged 16% to 27.81. And popular Big Tech momentum stocks like Apple (AAPL) are being caught in the whirlwind too – which helped Edge Pro subscribers nab a 380% gain in their Jan $110 puts.

Despite the rough start to the year, Wall Street watchers are not ready to say the bull market is over. “The reason for that is the USA economy is sound”. Urban explains why, “One of the factors that contributed to the that fact that they thought oil prices were going to stabilize, and when oil prices stabilize that we’re gonna be closer to that target rate of inflation”, He adds, “Now oil prices have decreased instead so they’re much less confidence can be had in terms of what inflation we’re going to be seeing throughout this year”.

Advancing issues outnumbered declining ones on the NYSE by 2,079 to 1,005, for a 2.07-to-1 ratio on the upside; on the Nasdaq, 1,961 issues rose and 899 fell for a 2.18-to-1 ratio favouring advancers.

Brent, the benchmark for global oil prices, closed below $29 a barrel ahead of a likely lifting of worldwide sanctions that curbed oil exports out of Iran. Gold surged 1.6% to $1091.50 an ounce. It’s fueled by a mix of Fed policy tightening (QE3 bond buying ended in December 2014 and rates were hiked 0.25% in December 2015 for the first time since 2006) and a U.S.-OPEC oil price war.

However, recent USA manufacturing has been soft.

“Markets have to go through several stages and right now they’re just holding their head and crying”, Krishna Memani, chief investment officer at Oppenheimer Funds in NY, told Bloomberg News.

Separately, sales at retail stores and restaurants slipped 0.1% from the prior month to $448.1 billion in December, the Commerce Department said Friday, meeting expectations. Fears about Chinese demand have also increased the pressure on oil and base-metals prices. It fell $2.95 to $29.78. The euro rose to $1.0911 from $1.0862, while the dollar fell to 117.05 yen.

Markets throughout Asia fell Friday, echoing the downbeat tone from Shanghai.

Citigroup was down 5 per cent at $US43.03, while Wells Fargo fell 3.8 per cent to $US48.65, after reporting largely in-line quarterly earnings.

“Everyone is focused on China volatility and energy volatility, and that’s swamping the larger story”, said Dennis Mitchell, senior portfolio manager at Sprott Asset Management. For the full year, retail sales rose 2.1 percent, the lowest since 2009. Shares declined 6.2%.

Prior to the August price drop, the S&P 500 had gone four years without experiencing such a short-term fall in prices. Shares fell 3.7%.