U.S. equities stumbled out of the gates in 2015 in a performance reminiscent of the start of 2014.
The Standard & Poor’s (S&P) 500 Index ended its worst month since that previous January, falling from a record level after an 11-percent annual gain, as concern mounted that slowing growth overseas will hurt the American economy at the same time that the plunge in crude and the stronger dollar have shown signs of eroding corporate profits.
A year ago, the S&P 500 tumbled after a 30-percent annual rally sent stocks to all-time highs. The S&P 500 sank 3.1 percent to 1,994.99 this month. The drop contrasted with a 7.2-percent surge in the Stoxx Europe 600, the best start to a year since 1989, as the European Central Bank expanded its stimulus plan to combat deflation.
Volatility returned to the US equities market, with stock swings nearly doubling from 2014, as oil prices plunged 9.4 percent and the dollar rallied to the highest in more than a decade. Treasuries posted the best start to a year since 1988.
“Investors are nervous,” Jeff Kravetz, the Phoenix-based regional investment director at US Bank’s Private Client Reserve, said by phone. “In the US, the economic picture is very strong, but overseas there are a lot of mixed signals. The question investors are asking in the US is, ‘Can the US carry the rest of the world in terms of economic growth?’”
US equities lost more than $700 billion in January as energy producers resumed declines and financial companies had the worst drop since May 2012. Technology shares also slid, with losses of more than 12 percent in Microsoft Corp. and Yahoo! Inc.
The index’s weekly swings were violent, with moves of at least 1.2 percent in three of the four periods. The gauge tumbled 2.8 percent in the final five sessions of the month, capping the biggest weekly advance since December 12.
The seventh straight monthly drop in crude prices fueled concern about the impact of plunging oil on corporate investment, and the strongest dollar in a decade is making American goods and services more expensive overseas, eroding sales. Companies from Procter & Gamble Co. to DuPont Co. and Pfizer Inc. have said the US currency’s strength is hurting profits.
Earnings at S&P 500 companies grew 2.7 percent in the last three months of 2014, according to a January 30 Bloomberg survey of analysts. That’s down from an estimate of 8.1 percent from a Bloomberg survey in October.