Dow Erases Gains for the Year

Interesting stock market volatility this last week, perhaps a precursor of broader economic calamity? And we're barely out of the last recession, hmm.

At the Wall Street Journal, "Tumultuous Week Shatters Market Calm as Global Growth Fears Rattle Investors":

Global stocks tumbled on Friday, dragging the Dow Jones Industrial Average into negative territory for 2014 and shaking the confidence that many investors had clung to despite lackluster growth around the world.

A wave of selling in the final hour of trading on Friday left the Dow at 16544.10, down 115.15 points, or 0.7%. The blue-chip index fell 466 points, or 2.7%, for the week, its worst weekly performance since August.

The Dow rose or fell at least 1% on three separate days, a sign of the stomach-churning worries now spreading through global financial markets.

As big U.S. companies begin reporting third-quarter results, many investors fear that some firms will say weakening foreign markets and the strengthening U.S. dollar held down sales and could hurt future performance.

Another problem: Because stock-price valuations are high, many investors believe low interest rates and inflation, strong earnings and steady economic growth are needed to keep pushing stocks higher overall.

The technology-laden Nasdaq Composite Index fell 4.45% for the week, while the small-stock Russell 2000 index slumped 1.4% on Friday. It is down 13% from its March high.

This week’s most troubling news came largely from Europe, where surprisingly soft economic reports again raised the specter of recession. Germany announced unexpected weakness in manufacturing and exports.

Meanwhile, falling oil and industrial-metals prices are fueling fresh worries that China, a buyer of vast quantities of raw materials, might be slowing down more than previously thought.

“It is the dollar and exposure to foreign economies that are weighing on the market here right now,” said Robert Pavlik, chief market strategist at Banyan Partners, which oversees $4.5 billion.

Still, the Dow is down only 4.3% from its record in September. While many money managers worry that the volatility isn’t over, few expect a bear market, meaning a decline of 20% or more. So far in 2014, the Dow has slipped 0.2%...

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