Sun, Apr 13, 2014 page15

• US market falls in line with NASDAQ

  ICARUS INDEX: The Dow and S&P500 aped the sliding NASDAQ as fears of overvalued tech stocks led to a correction some say is overdue given the indices’ meteoric recovery

  • AFP, NEW YORK
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  The NASDAQ Composite Index skidded lower for the third week in a row, but this time it took the rest of the market down with it.

  The NASDAQ slumped 128 points (3.10 percent) to 3,999.73 this week, while the Dow Jones Industrial Average and the S&P 500 joined the tech-rich index in the red after both avoided major falls the past two weeks.

  The Dow shed 385.96 (2.35 percent) to 16,026.75, while the broad-based S&P 500 lost 49.40 (2.65 percent) to 1,815.69 over the week.

  The broadening pain in the market has deepened talk that a pullback sparked by the overvaluation of high-flying technology and biotechnology names has morphed into an overall market correction.

  Tech names had an especially ugly end to the week. Since Wednesday’s close, Pandora Media Inc sank 15 percent, biotechnology company Celgene Corp fell 7.1 percent, Amazon.com Inc shed 6.1 percent and Netflix Inc lost 7.5 percent.

  However, other sectors also took a hit, with JPMorgan Chase losing 6.7 percent over the 48-hour stretch from Wednesday after being weakened by a disappointing earnings report, Macy’s sliding 3.3 percent and Visa Inc shedding 5.3 percent.

  “In previous weeks, it didn’t really go into the broader market,” Wunderlich Securities chief market strategist Art Hogan said of the declines. “When the trend broadens to the overall market, I tend to be worried that it becomes self-fulfilling.”

  FTN Financial chief economist Chris Low also said that investor psychology has deteriorated.

  “People are always talking about a correction being necessary, but once the correction is under way, panic tends to set in. We seen to be at that panic point,” Low said.

  Stocks had a muted reaction to Tuesday’s outlook from the IMF, which trimmed its forecast for global growth, but also alluded to a recovery that “is becoming not only stronger, but also broader.”

  The following day, US stocks rallied after minutes from a US Federal Reserve policy meeting last month showed no support for an early rise in interest rates.

  Stocks jumped more than 1 percent on Wednesday, with the NASDAQ leading the charge with a 1.7 percent surge, but sentiment shifted the next day, and the index suffered its steepest decline in two-and-a-half years as another wave of anxiety about tech sector overvaluation overtook the market.

  Thursday’s drop came on the heels of last moth’s trade data from China, which showed that imports fell 11.3 percent and exports by 6.6 percent. Low said the weak data was a factor in stocks’ late-week swoon.

  According to Low, less-discussed factors behind the retreat include a rise in healthcare costs due to the new healthcare law and the need of many investors to sell stocks to pay higher capital gains taxes following the stock market’s surge last year.

  Many market watchers believe a correction is neither surprising nor worrisome given how far stocks have risen since the financial crisis — the S&P 500 rose nearly 30 percent last year.

  Wells Fargo Advisors senior equity strategist Scott Wren is urging clients to take the dip as a buying opportunity. His firm projects that the S&P 500 will close the year in the 1,975 to 2,025 range.

  “I think there is probably a little more downside” to stocks in the near term, Wren said. “I don’t think there’s a lot.”

  Next week’s agenda includes releases on last month’s retail sales and housing starts, as well as the publication of the Fed’s Beige Book.

  The earnings calendar also picks up with reports from major firms such as Citigroup Inc, Coca-Cola Co, General Electric Co and Google Inc.
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