Stocks Start 2008 With A Thud
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Investors worried about a slowdown and inflation got a bit of both today, sending the Dow to its worst-ever point loss to start a new year. On a percentage basis, the Dow's 220-point, 1.67% decline was its worst start to a new year since 1983.
News that manufacturing unexpectedly contracted last month while prices paid rose sent stocks plunging, while $100 a barrel oil and weak residential construction added to fears of "stagflation," stagnant growth combined with rising inflation.
Federal Reserve meeting minutes released in the afternoon revealed that the Fed remains concerned both about the pace of economic growth and rising inflation pressures, yet the manufacturing data was weak enough for traders to begin pricing in another interest rate cut at the end of the month.
Yahoo and Amazon were two tech sector standouts, rising 2% and 4%, respectively, on analyst upgrades. Citigroup touted Amazon's growth story, while ThinkEquity cited Yahoo's attractive valuation.
The chip sector was particularly hard hit, off 3% as Intel and AMD plunged 5% each on Bank of America downgrades. LSI, National Semi, Analog Devices, Power Integrations and Semtech were also hit on the BofA sector downgrade, which cited margin, inventory and growth concerns.
Broadcom escaped the selling in the chip sector, edging higher on a patent win against Qualcomm.
The Nasdaq fell 42 to 2609, the S&P shed 21 to 1447, and the Dow plunged 220 to 13,043. Volume rose to 3.42 billion shares on the NYSE, and 2.08 billion on the Nasdaq. Decliners led by a 19-13 margin on the NYSE, and 20-10 on the Nasdaq. Downside volume was 76% on the NYSE, and 77% on the Nasdaq. New highs-new lows were 59-243 on the NYSE, and 66-218 on the Nasdaq.