The beginning of 2015 was also rocky, with the benchmark index
dropping 2.7 percent in its first three sessions, followed by a
two-day, 3 percent rally before eventually finishing January down
3.1 percent.
Meanwhile, investment strategies premised on buying shares based on
their momentum just posted the best year since 2007, which isn’t
great news for bulls. Past instances when momentum stocks -- defined
as the ones showing the biggest gains in the last six to 12 months
-- won have occurred closer to the end of rallies than the
beginning, signaling indiscriminate buying at a time when more
traditional share drivers such as earnings growth are starting to
wane.
Escalating tensions between Saudi Arabia and Iran are also adding to
worries Monday, according to Robert W. Baird & Co.’s Patrick
Spencer. “Middle Eastern concern and the escalation compounded by
further issues in China are all adding to short- term weakness,”
said Spencer, equities vice chairman at Baird in London. “The
outlook still looks reasonable and I would take any weakness to
selectively buy, especially in the consumer and housing market
recovery area.”
Sluggish Manufacturing
Focus will turn toward a swath of economic reports this week,
including data on factory activity, the monthly jobs report and
minutes from the Federal Reserve’s meeting that ended with the first
rate increase since 2006. A reading today showed manufacturing in
the U.S. contracted in December at the fastest pace since 2009 as
factories, hobbled by sluggish global growth, cut staff at the end
of 2015.
All of the S&P 500’s main groups dropped on Monday, with financial,
health-care and consumer discretionary shares down at least 1.7
percent. Microsoft Corp., Google parent Alphabet Inc. and Facebook
Inc. fell more than 1.2 percent. The Nasdaq Biotechnology Index sank
3.2 percent, the most in a month to weigh on health-care.
JPMorgan Chase & Co. and Wells Fargo & Co. paced the drop in the
financial group, down at least 2.6 percent as 83 of 87 members fell.
McGraw Hill Financial Inc. and Huntington Bancshares Inc. fell the
most, losing more than 3.2 percent. An index tracking bank stocks
slumped 2.6 percent to the lowest since Oct. 21, and traded with
volume 58 percent above their 30- day average, according to data
compiled by Bloomberg.
Role Reversal
Several of 2015’s biggest winners and losers reversed roles in the
first session of the new year. Netflix Inc. and Amazon.com Inc.
dropped more than 3.8 percent, among the benchmark’s worst
performers today after posting the strongest gains in 2015, up more
than 117 percent. Chesapeake Energy Corp. and Consol Energy Inc.
were the strongest gainers Monday, rising at least 8.4 percent,
after leading declines last year.
Energy companies in the S&P 500 fell 0.2 percent Monday, the
smallest decline among the main industries after posting the biggest
drop last year, down nearly 24 percent. Southwestern Energy Inc. and
Range Resources Corp. added more than 4.6 percent. Overshadowing
those gains, Chevron Corp. and Phillips 66 lost at least 1.2
percent.
Among companies moving on corporate news, Baxalta Inc. jumped 5.5
percent to an all-time high. Bloomberg News reported that Shire Plc
is in advanced talks to acquire the drugmaker for a deal of about
$32 billion in cash and stock, excluding debt.
Chipotle Mexican Grill Inc. dropped 6.5 percent to a more than
two-year low after analysts predicted a tough 2016 for the
restaurant chain. Chipotle’s reputation was battered in recent
months by an outbreak of E. coli that afflicted at least 53 people
in nine states. That was followed by a norovirus contagion at a
Boston location that sickened more than 140 college students.