New York: Is the selling over or has it just begun?
That’s the question investors are asking after the biggest weekly drop in the Standard and Poor’s 500 index since January. The stock market hasn’t had a correction, or fall of 10 per cent from recent highs, since 2011.
It is inching close to one, at least in technology stocks.
Investors drove the stock market lower for two straight days at the end of the week. Big drops in once-soaring tech stocks sent the Nasdaq below 4,000, and the index has fallen for three weeks in a row.
“The market has been trying to come back, but each time the selling just picks up,” said Quincy Krosby, a market strategist at Prudential. “The buyers are just not stepping in.”
The first-quarter earnings season has just started, but investors seem in little mood to wait for results. Financial analysts expect earnings for companies in the S&P 500 to drop 1.6 per cent from a year earlier, according to FactSet, a financial data provider. At the start of the year, they expected a jump of 4.3 per cent.
If profits do fall, it would be only the second quarterly drop in three years.
“Earnings are going to come in on the sloppy side,” said Peter Cardillo, chief market economist at Rockwell Global Capital. “The market needs to correct.”
Krosby said the market will be focused on the swath of corporate earnings due out next week, such as those for General Electric, Intel and several financial companies. Investors will also closely follow a speech by Federal Reserve Chair Janet Yellen.
Investors understand bad weather played a role in the performance of many companies during the first three months of the year, but they still want to hear whether demand for products and services is improving, Krosby said.
“The market is going to try to assess: Is the economy still losing momentum or gaining the traction we need to support valuations?” she said.
On Friday, the Nasdaq dropped 54.37 points, or 1.3 per cent, to 3,999.73. It was down 3.1 per cent for the week.
The Dow Jones industrial average fell 143.47 points, or 0.89 per cent, to 16,026.75 on Friday. The S&P 500 fell 17.39 points, or 0.95 per cent, to 1,815.69.
Some analysts say a correction in indexes would be healthy for the market, giving it a sturdier base on which to rally.
The Nasdaq is already well on its way. It is now 8 per cent below its recent high in March. The S&P 500 is 4 per cent off its recent high on April 2.
Among tech stocks making big moves Friday, Netflix fell 2.4 per cent, Amazon, 1.7 per cent and Google’s new Class C shares, 1.9 per cent.
JPMorgan Chase fell $2.10, or 3.7 per cent, to $55.30 on Friday. The nation’s biggest bank by assets said its earnings slid 20 per cent in the first quarter as revenue from bond trading and mortgage lending declined.
“They’re just struggling to grow, and then they didn’t have the strength out of the investment bank to help offset that,” said Shannon Stemm, financial services analyst for Edward Jones. “All around, it’s just a lackluster quarter for them.”