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Dow tumbles 2% as worries grow over emerging markets

January 24, 2014|By Andrew Tangel
  • Traders work on the floor of the New York Stock Exchange on Friday.
Traders work on the floor of the New York Stock Exchange on Friday. (Jin Lee / Bloomberg )

NEW YORK -- Stocks suffered a second day of steep declines as investors grew increasingly worried over economic growth in emerging markets.

The Dow Jones industrial average tumbled 318.24 points, or 2%, to 15,879.11. Combined with Thursday's drop of nearly 176 points, the blue-chip index of stocks was down almost 500 points in two days.

The broad Standard & Poor's 500 index fell 38.17 points, or 2.1%, to 1,790.29. The technology-focused Nasdaq composite shed 90.70 points, or 2.2%, to 4,128.17.

Stock markets in Europe and Asia were also down sharply. The rout follows an approximately 1% drop in U.S. equities on Thursday in the wake of a report showing Chinese manufacturing hit a six-month low and pointing to sluggish growth.

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The sell-off on Wall Street comes only weeks after the stock market enjoyed an epic rally of about 30%. The sharp run-up was fueled in part by the Fed's monumental stimulus program, known as quantitative easing.

That program has kept interest rates low as a way to stimulate economic growth and helped push investors into riskier assets such as stocks.

But as the Fed begins to taper its stimulus starting this month, investors appear to be pulling out of riskier assets -- and some emerging markets are feeling the effects of that retreat, analysts said.

“There was a lot of liquidity ... that just kept the party going overseas,” said Karyn Cavanaugh, a market strategist with ING U.S. Investment Management. "Now that the word is out that the Fed is tapering -- and indeed they are tapering -- there are worries that the liquidity is going to dry up and that people are pulling their money back.”


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