Stocks Drop as Treasuries Gain With Gold on China Data

New York (Jan 23)  U.S. stocks slumped, giving the Dow Jones Industrial Average (INDU) its biggest drop since August, and Treasuries rose after a gauge of China’s manufacturing shrank. Emerging-markets stocks fell while gold and natural gas rallied.

The Standard & Poor’s 500 Index fell 1.1 percent at 2:26 p.m. in New York, while the Dow dropped 1.3 percent. The Stoxx Europe 600 Index declined 1 percent from a six-year high. The MSCI Emerging Markets Index slid 1.4 percent, with a measure of Chinese shares in Hong Kong tumbling 2.1 percent. Treasury 10-year yields slumped to the lowest level since November. Natural gas jumped 2.1 percent and gold rose to the highest in more than a month. Turkey’s central bank intervened to stem the lira’s nine-day slump, the longest run of declines since 2001.

Chinese factory output may contract this month, a preliminary survey from HSBC Holdings Plc and Markit Economics signaled today as the People’s Bank of China added further funds to the financial system to ease a cash shortage. In the U.S., applications for unemployment benefits held near a six-week low, showing firings remain muted following the holidays. Companies from McDonald’s Corp. to Microsoft Corp. were scheduled to report earnings today.

Record High

The S&P 500 is down 1.3 percent for the year while the Dow has tumbled 2.5 percent, after the S&P 500 jumped 30 percent to a record last year, the most since 1997. Three rounds of Federal Reserve stimulus helped the benchmark index rise more than 170 percent from a 12-year low in 2009.

The rally has boosted equity valuations to near the highest level since 2009. The S&P 500 trades at 15.5 times the estimated earnings of its members, more than the five-year average multiple of 14.1, data compiled by Bloomberg show.

Alreaday today the Dow Index been hammered down 192 points to 16181, while the S&P500 tumbled 20 points to 1825.

The following analysis may give you an idea where US stocks are heading in 2014:

Ides Of March 2014

and  Stocks Are Hell Bent To Suffer A Sharp Correction In 2014