Stocks Tumble, Capping Worst Week for Wall Street Since 2012

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Justin Lane / EPA

A trader works on the floor of the New York Stock Exchange at the end of the trading day in New York, Jan. 24, 2014.

U.S. stocks tumbled again Friday, with the Dow Jones Industrial Average falling triple digits and recording its worst week since May of 2012.

The Dow Jones fell 318 points or nearly 2.0%, while the S&P 500 declined 38 points, or 2.1%. The tech-heavy NASDAQ had the worst day of them all, declining 91 points, or 2.2%.

The losses capped a terrible week for stock markets, as traders have been unimpressed by earnings by U.S. companies, and worried about news coming in from some of the most important emerging markets. A gauge of Chinese manufacturing activity spooked investors yesterday when it showed that sector contracting, and volatility in both the Argentinian and Turkish currencies has caused investors to lose faith in the economies of those countries.

“The volatility of the emerging markets and the currency impacts are affecting U.S. markets,” Eric Teal, who helps oversee $3.5 billion as the chief investment officer at First Citizens BancShares Inc. in Raleigh, North Carolina, told Bloomberg. “Following the strong gains of last year, I think it’s to be expected that you might have an overreaction here of selling.”

5 comments
sophar
sophar

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DeweySayenoff
DeweySayenoff

There are three ways to make profits: Improve efficiency, cut staff and sell more products.

By and large, with investors and businesses in their little circle-jerk and no job growth with businesses raking in profits, they've been using investments to improve efficiency, and then to cut jobs.  They're not selling more products because, well, they cut jobs and no one can afford to buy things like they used to be able to do.

Eventually, you reach the point of diminishing returns where no matter what you do to cut staff and improve efficiency, unless you sell more products, your bottom line is going to start suffering because giving investment money back to the investors isn't going to satisfy them like it used to.  After all, these days, investment is supposed to always return a profit.  (God forbid anyone actually lose money in what is an inherently risky proposition.)  That means you'll see quarter over quarter earnings start to slip, which hits the stocks because they're not as in demand when investors are always looking for a maximization of their profits over the short-term.

They're funny that way.

So this comes as no surprise.  Businesses are tapped out in their ability to turn a profit.  They have tons of  money, of course, but without demand, they're not going to hire anyone new.  Unfortunately, if they don't hire more people at liveable wage jobs (so they have discretionary funds to blow on anything), they won't sell more products.  This means businesses are well and truly screwed unless something else happens.  And that something else has to come from Congress, which means we all are well and truly screwed since Congress can't do a damn thing anymore.

Yoshi
Yoshi

This really wasn't a big deal. Looking at how high the markets have climbed over just the last year, this is nothing to write home about.

JoshSoffer
JoshSoffer

@DeweySayenoffOf course, one way businesses can increase profits without growing sales is through further mechanization.