Traders work on the floor of the New York Stock Exchange
New York - AFP
Wall Street stocks suffered one of the worst weeks of 2014 as global growth fears overwhelmed some positive economic news and pushed the Dow into negative territory for the year.
The Dow Jones Industrial Average lost 465.59 points (2.74 percent) at 16,544.10, leaving the index about 30 points below the closing level of 2013.
The losses in the other two leading indices were even bigger. The broad-based S&P 500 fell 61.77 (3.14 percent) to 16,544.10, while the tech-rich Nasdaq Composite Index tumbled 199.38 (4.45 percent) to 4,276.24.
All three indices have now dropped three weeks in a row.
Investors are rethinking the perception that mostly steady economic improvement in the United States makes Wall Street a solid bet for investors as other regions struggle with ebbing growth.
"This week's action indicates that a lot of investors realized that no equity market is truly decoupled from the others," said Sam Stovall, chief investment strategist at S&P Capital IQ.
"This week, people were saying 'Yes, the US might be doing better than the rest of the world, but if Europe falls into recession, that could drag the US down with it.'"
The outlook worsened significantly for Germany, Europe's biggest economy and the traditional driver of eurozone growth.
Official data showed a massive 5.8 percent drop in German exports in August and a 4.0 percent decline in industrial output during the month. Leading German think tanks also slashed their growth forecasts for the biggest eurozone economy.
"The German economy is stagnating. And there's no indication for the moment that will change before the end of the year," said Ferdinand Fichtner, an economist at Berlin think tank DIW.
The International Monetary Fund trimmed its 2014 global growth forecast to 3.3 percent, down 0.1 percentage point from July, as it warned of stagnation in advanced economies and highlighted risks from the Russia-Ukraine crisis, strife in the Middle East and the Ebola breakout.
The IMF did raise its outlook for the US, but warned the world's biggest economy could still be dragged down by weak growth elsewhere.
Analysts described a jittery investor environment.
"We are at a very fragile state of the market," said Michael James, managing director of equity trading at Wedbush Securities.
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US stocks did enjoy one bright run on Wednesday after minutes from the Federal Reserve's September monetary policy meeting suggested the central bank would keep near-zero interest rates for some time. Policy makers indicated rising concern about slow growth in Europe and the stronger dollar.
Some earnings reports were also positive. Aluminum producer Alcoa, which unofficially kicks off earnings season, reported third-quarter earnings of $149 million, about six times the $24 million in the year-ago period as it pointed to strong demand in aerospace and the North American commercial transportation sectors.
PepsiCo raised its outlook for 2014 adjusted earnings growth to nine percent from eight percent and posted third-quarter profits that bested expectations.
But investors seemed more moved by the outlook of semiconductor firm Microchip Technology, which sharply cut its sales outlook and predicted an industry-wide correction.
The dreary outlook spurred a major sell-off in semiconductor firms and a broader technology retreat Friday that was largely responsible for 2.3 percent decline in the Nasdaq during the session.
Earnings season picks up considerably next week with reports from leading banks like JPMorgan Chase and Citigroup and from big technology companies including Google and Intel.
The agenda also includes some closely watched economic reports, such as retail sales for September, as well as the Federal Reserve's "Beige Book" describing economic conditions in the US.