Farewell to a cold January, and we are not just referring to the weather. Stocks plunged abruptly during January, with the Dow falling more than 5%, which represents the worst month of January since 2009, when stocks were still in decline in the aftermath of the financial crash of 2008.
The S&P 500 slipped more than 3% this month, while the Nasdaq has shed nearly 2%. Stocks have been hit particularly hard during the past two weeks due to emerging market worries and weak earnings.
Those factors also pressured the market on Friday. The Dow fell more than 150 points, or almost 1%, while the S&P 500 lost 0.7%, and NASDAQ declined 0.5%. As stocks continued to lose ground, CNN Money’s Fear & Greed index, which measures seven indicators of market sentiment, fell further into “Extreme Fear” mode.
The market pullback hasn’t been a total surprise though, given how well stocks did in 2013. Many experts believe stocks could continue to drop before resuming their upward trend. “Frankly, we’ve been telling clients to expect a 5% to 10% decline,” said Matt King, chief investment officer at Bell Investment Advisors. “We didn’t think it would happen so early in the year, but it’s been such a good run for markets that a meaningful correction is normal and healthy.”