Jan 31 - Summary: Emerging markets strike again, leaving Wall Street with the worst January since 2010. Weaker-than-expected company results along with damp outlooks added to the market's malaise. Conway G. Gittens reports.
Wall Street has its worst start to the year since 2010 and the S&P 500 posting its biggest monthly drop in over a year and a half. Most of the worry is centered around emerging markets. Jeff Saut, chief strategist at Raymond James, says equities were set for a pullback anyway, emerging markets just happened to be the catalyst. SOUNDBITE: JEFF SAUT, CHIEF STRATEGIST, RAYMOND JAMES (ENGLISH) SAYING: "You've got a lot of hot money that was borrowed in Japan in yen terms, converting those yens to pesos and buying things like the Argentine bond market on ten, twenty, thirty times leverage. And then, when the bond market crashed overnight with the raise in rates, with a concurrent crash in their currency, the hot money crowd started losing money really fast. So they had to sell their Argentine bonds, they had to take the losses on the peso, convert back to yens and pay back the loans, and it was a kind of a pile on effect. And that crash in the emerging and frontier markets, obviously, rolled into the world-wide markets in developed countries as risk was taken off the table." Corporate headlines added to Friday's weakness after an attempt at a rally fell short. As for the week: blue chips lost 1.1 percent, while the Nasdaq gave up six tenths of a percent. Amazon.com weighed on the market a day after the company missed Wall Street's estimates and warned of a possible operating loss. Shares tumbling roughly 11 percent to a 2-1/2 month low. Mattel dropped over 12 percent after the toy maker saw North American sales plunge in the holiday quarter. Chevron was down 4.1 percent after profits dropped last quarter. MasterCard lost 5.1 percent as higher costs led to weaker than expected earnings. But Tyson Foods, one of a few bright spots, with an 8.4 percent gain as profits topped forecasts. On the consumer front...Wal-Mart shaved its outlook for the fourth quarter and is guiding towards the low end for the fiscal year. Lower income shoppers are being hurt by a cut in food stamp benefits. Meanwhile, a separate survey shows middle-income shoppers not feeling better this month, leading to a drop in consumer sentiment. Looking to Europe: stocks posted their first monthly loss since August, knocked down by concerns turmoil in emerging markets will hurt corporate earnings.