MARKET REPORT

After 2013 highs, 2014 slumps in

NEW YORK - The Standard & Poor’s 500 index began the New Year on Thursday with its worst performance in three weeks as energy and technology companies pulled down the stock market.

The S&P 500 fell 16.38 points, or 0.9 percent, to 1,831.98, its worst start to a year’s trading since Jan. 2, 2008, when the index slumped 1.4 percent.

The Dow fell 135.31 points, or 0.8 percent, to 16,441.35. The Nasdaq composite slid 33.52 points, or 0.8 percent, to 4,143.07.

Stocks started the year at lofty heights after a combination of rising company earnings and economic stimulus from the Federal Reserve pushed major indexes to record levels in 2013. The S&P 500 surged almost 30 percent, its best year since 1997, and the Dow Jones industrial average climbed 26.5 percent, the most since 1995.

“The market was grossly overbought and needed to pull back,” said Peter Cardillo, chief market economist at Rockwell Global Capital. “But fundamentally everything is looking pretty good.”

Energy stocks fell as the price of oil dropped $2.98, or 3 percent, to $95.44 a barrel. Oil slumped after reports that an end to protests at a major Libyan oil field could return 300,000 barrels of daily production to the global market.

Technology stocks lost ground after analysts published gloomy notes on companies in the sector. Analog Devices lost $1.65, or 3.2 percent, to $49.28 after analysts at Goldman Sachs advised its clients to sell the chipmaker’s stock, saying it is overvalued compared with its peers.

Apple shares fell $7.89, or 1.4 percent, to $553.13, after Wells Fargo cut its outlook on the stock to “market perform” from “outperform,” saying profit margins may come under pressure later this year.

Some analysts said investors shouldn’t read too much into the lackluster start to the year because trading volumes were below normal as the Christmas season wound down with many market participants still away from their desks.

“I don’t think we can really start counting till Monday,” said Dan Morris, Global Investment Strategist at TIAA-CREF. “A lot of people are still on holiday.”

Investors will be hoping that the stock market steadies because its performance in January often gives an indication of how the rest of the year might turn out. The January barometer has proven accurate almost 90 percent of years since 1950, according to the Stock Trader’s Almanac.

“More people seem to be wary, as we are, of potential corrections as markets get overexcited,” said Oliver Wallin, who helps oversee $5.6 billion as investment director at Octopus Investments Ltd. in London. “The question is just when to time it. A lot of people are willing to continue in this rally but are nervous at the same time. We’ve got one eye on the exit but we know there is money to be made in the short term.”

The yield on the 10-year Treasury note climbed to 2.99 percent from 2.97 percent after some encouraging reports on the economy. The yield on the note, which rises when investors sell bonds, is close to its highest since July 2011.

The number of Americans seeking unemployment benefits last week fell by 2,000, extending a recovery in the job market, and U.S. manufacturing grew at a healthy pace in December as factories stepped up hiring and received more orders.

Information for this article was contributed by Alexis Xydias and Callie Bost of Bloomberg News.

Business, Pages 24 on 01/03/2014

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