Start of 2016 hands stocks steep setback

Oil, China hammer indexes

A trader follows stock prices Friday at the New York Stock Exchange. The Dow Jones industrial average and the Standard & Poor’s 500 both fell about 6 percent this week.
A trader follows stock prices Friday at the New York Stock Exchange. The Dow Jones industrial average and the Standard & Poor’s 500 both fell about 6 percent this week.

NEW YORK -- A wave of late selling pummeled U.S. stocks Friday, pushing the market to its worst week since September 2011, and crude oil prices tumbled to a 12-year low.


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AP

Gregory Rowe (left), with Livermore Trading Group, keeps an eye on stock prices Friday at the New York Stock Exchange. Stocks started the day higher behind a rebound in Chinese stocks and encouraging job market news.

The dismal start to the new year comes as investors worry that China's huge economy is slowing. That has helped send the price of oil plunging, the latest blow to U.S. energy companies.

The Dow Jones industrial average dropped 167.65 points, or 1 percent, to 16,346.45. The Standard & Poor's 500 index fell 21.06 points, or 1.1 percent, to 1,922.03. The Nasdaq composite index fell 45.80 points, or 1 percent, to 4,643.63.

The Dow and S&P 500 are each down about 6 percent for the week. The Nasdaq composite fell even more, 7.3 percent. The world's 400 richest people lost almost $194 billion this week, according to the Bloomberg Billionaires Index.

Shares of industrial and technology companies such as Boeing and Apple that do a lot of business in China fell sharply this week. Mining companies such as Freeport-McMoRan plunged as copper prices have fallen. China is a major importer of copper.

Stocks started the day higher, driven in part by news of an encouraging burst in hiring last month by U.S. employers. China's stock market also rose 2 percent overnight, recovering somewhat after steep drops earlier in the week triggered trading halts.

Indexes wavered between small gains and losses for most of the day, but took a decisive turn lower in the last hour of trading. That made this the worst week since September 2011, when the market was roiled by the fight over the U.S. debt ceiling and Standard & Poor's move to cut the credit rating of the U.S. government.

"When investors saw there was no traction and the market was unable to hold rallies over several attempts throughout the day, it just became fear of going into the weekend," said Gene Peroni, a fund manager at Advisors Asset Management Inc. in Conshohocken, Pa. "The market has just been so reactive to news, people will wait on the sidelines and see what the weekend brings. It has been a rough week."

The largest losses Friday went to financial stocks. JPMorgan Chase lost $1.35, or 2.2 percent, to $58.92 and Citigroup fell $1.43, or 3 percent, to $46.13. Health care stocks slumped, led by drug companies. Energy stocks also skidded as the price of oil, already at decade lows, continued to fall.

European stocks also rose early in the day, but couldn't hang on. The FTSE 100 index of leading British shares declined 0.7 percent while Germany's DAX lost 1.3 percent. The CAC-40 in France slid 1.6 percent.

The same pattern held in the U.S. In its monthly jobs report, released before the stock market opened, the Labor Department said U.S. employers added 292,000 jobs in December, far more than economists had forecast.

That's the latest sign the U.S. economy is still growing. On average, employers added 284,000 jobs per month in the fourth quarter, the best rate in a year.

Michael Fredericks, portfolio manager for BlackRock Multi-Asset Income Fund, said the labor market is healthy and wages could improve this month. "These are unusually strong job-creation numbers," he said.

Fredericks said the low wage growth and limited inflation will make the Federal Reserve proceed cautiously as it raises interest rates. In December the Fed raised rates for the first time in nine years, but interest rates are still very low.

Throughout the week, worries about China's economy and shocks to its markets have canceled out positive news from the U.S. and Europe. While China's economy is still growing, that growth isn't as fast as it has been. That could hurt sales of everything from iPhones to oil and heavy machinery.

Volatility in Chinese stock markets spurred a global sell-off in riskier assets as concern deepened over the ruling Communist Party's ability to manage an economic slowdown.

Oil prices also lost ground. U.S. crude fell 11 cents to close at $33.16 a barrel in New York and Brent crude, a benchmark for international oils, declined 20 cents to $33.55 a barrel in London.

Exxon Mobil lost $1.54, or 2 percent, ending at $74.69, and Tesoro fell $5.41, or 5 percent, to $101.62.

This week retailers started disclosing their Christmas results. Gap and American Eagle both reported disappointing sales. Gap stock dropped $3.83, or 14.3 percent, to $22.91, its lowest in almost four years. American Eagle tumbled $2.64, or 16.6 percent, to $13.24.

Department stores were among the biggest losers on the S&P 500. Their Christmas sales have been hurt by the unusually warm winter weather. Kohl's fell $2.98, or 5.9 percent, to $47.88 and Macy's lost $1, or 2.7 percent, to $35.89.

Apple Inc.'s shares rose 51 cents Friday to close at $96.96. Apple, the world's most valuable company, has lost about $52 billion in market capitalization this year.

After this week's stock market turbulence triggered by China, investors will begin to contend with another expected decline in corporate earnings as the reporting season begins. Alcoa Inc., JPMorgan Chase and Intel Corp. are scheduled to deliver results next week. Analysts forecast profits for S&P 500 members fell 6.7 percent last quarter.

Information for this article was contributed by Marley Jay of The Associated Press and by Brendan Coffey, Jack Witzig, Lu Wang, Anna-Louise Jackson and Oliver Renick of Bloomberg News.

Business on 01/09/2016

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