Stock markets were falling around the world on Friday as investors worried about an economic slowdown in emerging markets.
The concerns have led to the first sustained decline in American stock indexes in 2014. The Standard & Poor’s 500 index was down about 1.2 percent at one point on Monday morning, bringing it down 2.2 percent for the year so far. The Dow Jones industrial average was down 1 percent and 3.3 percent for the year.
The pessimism in the markets came after a nearly unbroken market rally for months. Many strategists had been anticipating some kind of pullback.
The declines this week have been fed by disappointing economic news out of China and the rest of the developing world. An index of Chinese manufacturing growth released on Thursday showed that the sector was contracting for the first time in six months. A number of slightly disappointing economic data points in the United States has led to some concern that a slowdown in China could be contagious. On Thursday, data on home sales came in slightly lower than expected.
Emerging markets have been sensitive to the efforts of the Federal Reserve to slow down the bond-buying program it has used to stimulate the economy and lower interest rates. When the Fed announced last summer that it was planning to pull back on the program, it hit developing countries like China and India hard.
Since the Fed officially announced in December that it would buy fewer bonds, investors in emerging markets have been cautious. There are fears that rising interest rates will choke off growth in countries dependent on foreign lenders. This week, the currencies in several countries, including Turkey and Argentina, have been falling sharply. Next week, the Fed is scheduled to meet and announce whether it will continue to lower its bond purchases.
“Emerging markets can’t seem to escape the shadow of the Federal Reserve,†Andrew Wilkinson, the chief market analyst at Interactive Brokers wrote to clients on Friday.
