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In stark contrast to the big 2013 run, Wall Street posted its worst annual kick off in four years as worries swirled over emerging-market tumult.
The Dow Jones Industrial Average dropped 150 points, or 0.94%, to 15698, the S&P 500 fell 11.6 points, or 0.65%, to 1783 and the Nasdaq Composite slumped 19.3 points, or 0.47%, to 4104.
The broad S&P 500 rallied 30% last year. So far, 2014 isn't off to a great start. The broad S&P 500 slid 3.5% in January in its worst annual starter since 2010. Adding to the bearish mood, the broad-market barometer also snapped a four-month winning streak.
"The renewed concern about emerging markets is likely adding to a growing lack of conviction in earnings trends, with some fund managers also worrying about currency shifts, deflationary risks and potentially higher labor costs," said Tobias Levkovich, Citigroup's chief U.S. equity strategist in a note to clients. "Unfortunately, there is no clear signal to step up quite yet and buy aggressively."
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Emerging-Market Worries Flare Up
Global worries boiled back to the surface again on Friday.
Emerging-market currencies took yet blow on the day, with the Turkish lira, South African rand, Russian ruble and others sustaining another hit. Traders said the move came after a slew of small factors -- like commentary from a Hungarian minister -- sent skittish traders ditching risky currencies.
In a sign of the worries about emerging markets, investors yanked $6.4 billion from emerging-market stock funds in the week ended this Wednesday, Bank of America Merrill Lynch reported. The outflow was the biggest since August 2011.
On top of that, eurozone inflation cooled to a year-over-year pace of 0.7% in January from 0.8% in December -- lower than economists expected. The European Central Bank has dropped interest rates to record lows in a bid to push prices higher and avoid a potentially deflationary situation.
Still, Michael Block, chief strategist at Rhino Trading Partners, said the cooling inflation isn't all bad.
"EU deflation is a bad is good scenario because it has expectations rising that the ECB will do some form of accommodation in March," he said.
Echoing that remark, analysts at Societe Generale told clients "while euro inflation will be low by historical standards ... inflation is comfortably far away from deflation."
Block added that Friday's action is also being driven by "risk management" as traders adjust positions after what has been a tough month for Wall Street.
"This is not fundamental," he said, "it is pain related."
Mixed Corporate News, Data
On the corporate front, Google (GOOG) revealed mixed quarterly results, while Amazon.com (AMZN) missed on both lines. Wal-Mart (WMT) cut its fourth-quarter view to a range just below what it previously said, sending shares of the world's biggest retailer sliding.
Elsewhere, the Commerce Department reports consumer spending rose 0.4% in December, slightly above expectations of 0.2%, while personal income remained unchanged from November. Economists expected personal income to rise 0.2%.
The Institute for Supply Management-Chicago’s PMI index showed manufacturing in the region slowed to 59.6 in January, slightly higher than Wall Street’s estimate of 59, but down slightly from December’s 60.8. The new orders sub-component surged to 64.6 from 43.9 the month prior. Readings above 50 point to expansion, while those below indicate contraction.
A reading on consumer sentiment from Thomson Reuters and the University of Michigan rose slightly in late January to 81.2 from a preliminary reading of 80.4 earlier in the month. Wall Street anticipated a reading of 81.
In commodities, U.S. crude oil futures fell $1.06, or 1.1%, to $97.17 a barrel. Wholesale New York Harbor gasoline fell 0.66% to $2.645 a gallon. Gold rose $6.80, or 0.55%, to $1,249 a troy ounce.