Market Information

A round of weak manufacturing reports Monday reignited fears about the health of the U.S. economy, fueling the sharpest one-day decline in the Dow Jones Industrial Average since June.

After weeks of focusing on economic and political troubles in emerging markets, investors shifted their attention to domestic concerns. Factory output expanded more slowly in January as manufacturers dialed back on adding to their inventories, while weakness abroad and unusually cold weather at home muffled activity.

The Dow tumbled 326.05 points, or 2.1%, to 15372.80, in its seventh triple-digit drop of 2014. The average is down 7.3% this year.

Asian markets fell in early trading Tuesday, with Japan down 2.3%, Hong Kong down 2.2.% and South Korea down 1.5%.

Recent reports have raised concerns that the U.S. economy may have lost some of its momentum. Job creation skidded sharply in December, and some worry January’s report, due Friday, might also disappoint. Several big retailers have reported lackluster holiday sales, and the housing market has shown signs of cooling in the face of higher interest rates.

Concerns about the economy come at a time when the Federal Reserve has begun its long-awaited steps toward reducing economic stimulus. The result Monday, traders said, was stepped-up selling from long-term investors who up until this point had largely sat tight during January’s stock declines, when the focus had been on woes in places such as Turkey, Argentina and China.

Hardest hit Monday were the stocks of smaller companies, whose fortunes are often seen as more closely tied to the U.S. economy than are those of large-company stocks. New York Stock Exchange composite volume was 4.68 billion shares, the most in a session this year.

Meanwhile, bonds rallied on the combination of the soft economic news and buying from investors taking shelter from the stock-market tumult. As bond prices rose, the yield on the Treasury 10-year note fell to 2.585%, from 2.669% late Friday, its lowest level since Oct. 31. Gold futures shot higher, benefiting from renewed interest in the metal as a haven.

The broader outlook for the U.S. economy remains upbeat. Last week, the Federal Reserve—announcing another pullback on a bond-buying program meant to spur growth—said the economy has shown “growing underlying strength.” On Monday, the Fed said banks had made it easier for businesses to secure loans, while companies were showing more appetite for borrowing late in 2013.

 

Data from WSJ.com