Dow down big on Yellen's first day

McClatchy Washington BureauFebruary 3, 2014 

How'd your first day on the job go, Janet Yellen?

The Dow Jones industrial average plunged more than 326 points Monday, an auspicious start of Janet Yellen's first day on the job as chair of the Federal Reserve.

The Dow closed off 326.05 points, or more than 2 percent, to 15,372.80. The S&P 500 was down 40.70 points to 1741.89 and the NASDAQ dropped 106.92 points, or 2.6 percent, to end at 3996.96.

Stocks dipped sharply after a weak report on manufacturing, coming on the heels of other recent soft data and a dismal December jobs report. It all puts a heightened expectation on January hiring numbers, due out from the Labor Department on Monday.

Monday marked the seventh time since the start of 2014 that stocks posted triple-digit daily losses. And with major indices having lost 5 percent or more of value this year, there are questions on Wall Street as to whether a correction is afoot.

In a bull market, where stocks have run ahead of that should be their fair value, a correction is defined as a 10 percent correction in price.

It all serves to underscore the job awaiting Janet Yellen as the new Fed chair. In the number-two position, she was deeply involved in launching a program of purchasing government and mortgage bonds to stimulate the economy. Stocks have been one of the biggest winners under the program, which flattens returns on bonds and drives investors into stocks in search of bigger profits.

But in January, the Fed began tapering back its purchases, repeating it again in February. Investors are fretting the possibility that stocks will lose their sugar high under Yellen in months ahead, and that the market must find a new floor for prices.

Coming days should give more sense of whether there is a correction, meaning stock prices had been inflated, or whether it is just investors selling off to lock in gains much like pruning back a bush.

 

 

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