The Dow Tumbles 326 Points On Weak Data Hibah Yousuf CNN Money February 3, 2014
February is looking an awful lot like January for investors. Emphasis on awful. The Dow tumbled 326 points Monday, or almost 2.1%, after a much worse-than-expected reading on manufacturing activity in the United States. The S&P 500 and Nasdaq were also down more than 2%. CNNMoney's Tech 30 index was down sharply as well. Investors were disappointed after the Institute for Supply Management's monthly index showed that manufacturing activity last month expanded at its weakest pace since May. The bad news comes as investors are still reeling from a rough January. Disappointing earnings and volatility in emerging markets sent stocks sharply lower during the first month of the year. The Dow tumbled more than 5% last month -- its worst January since 2009. Many experts think the market could fall further, following big gains in 2013 and the fact that the stocks haven't taken a big breather in a while. Though stocks took a small step back last spring, they haven't experienced a correction, typically defined as a decline of 10% or more, in more than two years. With Monday's losses, the Dow is down more than 7% from the all-time high it hit on the last day of 2013, while the S&P 500 has fallen almost 6% from the all-time high it reached last month. Plus, stocks could continue to be volatile ahead of the monthly jobs report due Friday and the possibility of another debt ceiling debate, said Kristina Hooper, investment strategist at Allianz Global Investors. But she thinks investors should not be scared by the market sell-off. "Rather, they should embrace the opportunities it creates."
But investors were clearly afraid. The VIX (VIX), a measure of volatility, surged 15%. And CNNMoney's Fear & Greed Index, which looks at the VIX and six other gauges of market sentiment, shows even more levels of Extreme Fear. The possibility of a bigger pullback was also a hot topic among traders on StockTwits. "$SPY way over extended," said MacDee. "Been overdue for a severe severe correction. Bearish." But leopardtrader said he's using the weakness as an opportunity to buy stocks: "Market keep creating great opportunities. The rebound will be fast and furious as usual $SPY." Still, others were worried by the fact that many traders are dismissing the pullback as a normal and healthy correction. That could mean that stocks are in for a sharper downward move. "$SPY no one is predicting anything more than a correction which makes me think we might be in trouble...Bearish," said Undecided. Related: Fear & Greed Index falls further into Extreme Fear In corporate news, Herbalife (HLF) shares rose more than 7% after the company said fourth quarter earnings would top forecasts. The company also raised the amount of its planned share repurchase by $500 million. The stock was briefly lower in the afternoon after hedge fund manager Bill Ackman's firm Pershing Square released a series of reports detailing why it thinks Herbalife is a pyramid scheme. The activist investor has made these accusations about Herbalife for more than a year, but the nutritional supplements marketer has refuted those claims. Shares of Jos. A. Bank Clothiers (JOSB) declined after The Wall Street Journal reported that the company is in talks to buy fellow apparel retailer Eddie Bauer. The potential deal would be the latest twist in the battle between Jos. A. Bank and Men's Wearhouse (MW). Both retailers have offered to buy each other. Shares of RadioShack (RSH) were higher as investors seemed to appreciate the company's self-
deprecatory Super Bowl ad. Radio Shack showed that it was getting rid of its 1980s image and products and unveiling a new store. But even with Monday's move up, the stock is still well below its 52-week high. Traders on StockTwits also seemed to enjoy the commercial but were skeptical that RadioShack could really turn its business around amid increased competition from Amazon.com (AMZN, Fortune 500). "Great Radio Shack $RSH commercial trolling itself," said Estimize founder LDrogen. "Too bad it won't matter." StockTwits trader DominoTree had the same sentiment. "Even if they give Radio Shack a new collar, it's still the same dog with the same fleas," he said. "$RSH Bearish." But a handful of traders were optimistic. "$RSH Not everybody is tech savvy," said Caviar. "They could also lead a 3D Printer retail boom like they did with computers .They rule in rural communities." Automakers reported January sales Monday. The news was mostly bad. Ford (F, Fortune 500). GM (GM, Fortune 500) and Toyota (TM) shares fell after posting sales declines in January that were even larger than what analysts were expecting. There was one bright spot though. Chrysler reported an increase in sales that topped forecasts. Restaurant operator Yum! Brands (YUM, Fortune 500) is set to release quarterly results after the closing bell. Related: Can stocks shake off January jitters? European markets finished with losses after investors ignored reports of stronger manufacturing activity in the eurozone in January. Many Asian markets were closed for the lunar new year but those trading moved lower, with the Nikkei in Japan declining by 2%. The benchmark Nikkei has tumbled 10.3% so far this year. That means the index is now undergoing a correction, after posting a whopping 57% gain in 2013 -- its biggest annual rise in over 40 years. Traders in Asia were cautious after the release of weak official Chinese manufacturing data. Many emerging markets have suffered over the past few weeks as investors have moved money out of riskier markets in favor of relative safe havens. Rad! RadioShack 80's ad boosts stock VIDEO BELOW http://money.cnn.com/video/investing/2014/02/03/investing-buzz-radioshack-super-bowl-80sad.cnnmoney/
Welcome Janet: Worst February Start For Stocks In 32 Years Zero Hedge February 3, 2014 The Nasdaq plunged by the most in over 8 months today and broke all the way back to unchanged from the December taper decision of the Fed. All major US equity indices are now negative from the time the Fed decided to slow its flow of free money. The Dow closed below its 200DMA for the first time since December 2012. The S&P 500 closed the furthest below its 100DMA since QE3 started. USDJPY was in charge and everything was higher or lower beta off of that as it broke 102 early then 101 later in the day (with the Nikkei -700 points from the day’s highs). Treasuries rallied around 5bps to fresh 7month low yields for 30Y. Gold and Silver surged, adding 1% on the day as the USD lost 0.25% on the day (led by the 1% strength in the JPY). VIX smashed to 14 month highs over 21%. Credit deteriorated but stocks are catching down. Just 8 hours into her reign, QEeen Janet has some work to do… “Not off the lows”
Summing up the JPY carry trade unwind… (h/t @StalingradandPoor)
This is the worst start to a month since 1982 for the Dow and S&P and the worst since records started on the Nasdaq. The Dow Industrials slammed back under the 200DMA – lowest in over 3 months; down 3% since the taper and down over 7% in 2014
The Nasdaq is down 2.6% – its biggest drop in 8 months – its worst start to a month on record; testing the 100DMA and unchanged to Taper The S&P dropped 2.2% – its biggest drop since June; lowest in over 3 months and well below its 100DMA – furthest below its 100DMA sicne Nov 2012. Since the taper, major indices are all negative now…
And since the new year, they are in trouble‌
USDJPY was in charge…
VIX has risen 64% on the last 2 weeks – its fastest rise since the US debt downgrade debacle in summer 2011…and the highest close since December 2012
It seems, once again, that credit investors smelled something long before the exuberant marginal stock buyer‌
The USD weakened led by JPY and EUR strength‌
Treasuries were well bid all day after the weak ISM data… 2s10s pushed to 228bps – its lowest in over 3 months
And commodities were very mixed with growthy oil and copper down and safe haven gold and silver up…
Charts: Bloomberg Bonus Chart: The Nikkei is down 2300 points year to date (from 16,450 to 14,160) and the Dow is down over 1200 points year-to-date (from 16,540 at the close of 2013 to 15,316 lows today)
Bonus Bonus Chart: HerbaLOL‌
Yellen Sworn In As Fed Chair In Brief Ceremony Martin Crutsinger ap.org February 3, 2014
Janet Yellen officially took over the leadership of the Federal Reserve on Monday — and along with it a delicate task: Unwinding the Fed's extraordinary economic stimulus without spooking investors or slowing a still-subpar economy. Yellen, the first woman to lead the Fed in its 100 years, was sworn in during a brief ceremony in the central bank's board room. She succeeded Ben Bernanke, who stepped down last week after eight momentous years. Bernanke is joining the Brookings Institution, a Washington think tank, where he will be a distinguished fellow in residence, Brookings announced Monday. The economy Yellen inherits is far stronger than the one Bernanke faced in the fall of 2008, when the worst financial crisis since the 1930s erupted. Bernanke spent the rest of his tenure launching and managing an array of programs that are widely credited with helping restore lending and strengthen the financial system and economy after the Great Recession. Yellen, 67, who served as vice chair under Bernanke, is taking over just as the Fed has begun its first modest moves to scale back its enormous support for the economy. At a meeting last week, the last under Bernanke's leadership, the Fed approved a second $10 billion reduction in its monthly bond purchases to $65 billion. The first cut was announced at the Fed's December meeting, when it said it would trim its purchases from $85 billion a month, the level for more than a year. The Fed's bond buying has been intended to keep long-term interest rates near record lows to stimulate the economy. But as the economy has improved, Fed officials have decided it could withstand less help. The Fed is expected to keep reducing its bond purchases this year and end them altogether in December.
If the Fed moves too quickly to withdraw its stimulus, it could spook financial markets and send rates higher. Conversely, paring its bond buying too slowly could risk creating bubbles — that might burst — in real estate, stocks or other assets. Already, concern about reduced Fed bond buying and the prospect of higher U.S. rates has shaken global markets. Central banks in several emerging nations have raised rates to try to prop up their falling currencies and control inflation. Stock prices have sunk. Countries such as Turkey, India and Brazil had benefited from the Fed's bond purchases. Investors poured money into these countries in search of higher yields than they could get in the United States and other developed nations. Now, with U.S. rates possibly headed up, investor money is flowing back out of these countries. Sung Won Sohn, an economics professor at California State University Channel Islands, said he wouldn't be surprised if the Fed slowed or even halted its bond reductions if the turbulence overseas worsens. "If the global market turmoil continues, I think the Fed will have to take notice," Sohn said. "We are living in an interconnected world, and I don't think the Fed can ignore what is happening overseas." The Fed's next meeting, the first with Yellen in charge, is March 18-19. She is scheduled to hold a news conference afterward. Before then, Yellen will appear before Congress next week to deliver the Fed's twice-a-year report on its handling of rates and its economic outlook. House Financial Services Committee Chairman Jeb Hensarling, R-Texas, has been vocal in his criticism of the Fed's policymaking. Hensarling has argued that the Fed's use of trillions in bond purchases and ultra-low rates have left the country vulnerable to higher inflation and economic instability. He has announced hearings on the Fed's bond buying and its "potential unintended consequences." Yellen has said that such fears are overblown and that the Fed has the means to monitor risks and address them. A close ally of Bernanke, Yellen is expected to follow his approach of maintaining low short-term rates while gradually scaling back the bond purchases designed to keep long-term rates low. Yellen made no comments during the ceremony Monday in which the oath of office was administered by Fed Governor Daniel Tarullo, the senior member of the Fed's seven-member board. She was sworn in before a fireplace in the Fed's stately board room. Her husband, George Akerlof, a Nobel-winning economist, was present, as were Fed board members and staff. Yellen's four-year term as Fed chair will end on Feb. 3, 2018. But Fed chairs generally serve more than one term. In the meantime, a blog posting from Brookings said Bernanke would work on a book about his years at the Fed. In the past, Bernanke has said he looked forward to writing and giving speeches once he stepped down.
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