Wall St hammered; S&P 500 hits lowest since Oct 2014


U.S. stock indexes notched deep losses in volatile trading on Friday, with the S&P 500 hitting its lowest since October 2014 and the Dow losing more than 500 points, as oil prices dived below $30 per barrel.

All 10 major S&P sectors were in the red and all 30 Dow components lower. The Russell 2000 small-cap index fell as much as 3.5 percent to its lowest since July 2013.

The beaten-down energy sector's 4.43 percent slide led the declines, as oil prices fell 6.5 percent. The technology sector was down 4.31 percent, as Intel's weak report weighed heavily on chip stocks.

“Investors are scared to death, and the fact that it's happening at the beginning of year has some historical significance,” said Phil Orlando, chief equity market strategist at Federated Investors in New York.

At 13:01 p.m. ET (1801 GMT), the Dow Jones industrial average was down 448.5 points, or 2.74 percent, at 15,930.55.

The S&P 500 was down 52.35 points, or 2.72 percent, at 1,869.49.

The Nasdaq Composite index was down 159.40 points, or 3.45 percent, at 4,455.60.

The three main indexes were set to test their percentage declines on Aug. 24 when the market plunged after China devalued the yuan.

The S&P 500 has fallen 13 percent and the Dow 13.7 percent from their highs in May, pushing them into what is generally considered as 'correction territory'.

The CBOE volatility index jumped as much as 29.2 percent to 30.95, it's highest since September.

“When we started off the year, we were at the crossroads of concern and optimism and clearly, we've gone down the road of concern pretty quickly,” said Dan Farley, regional investment strategist at U.S. Bank Wealth Management in Minneapolis.

Dow components Exxon and Chevron were down 2.5-4 percent, while Caterpillar dropped 4.4 percent.

Intel tumbled 10 percent to $29.48, its steepest drop in seven years, after the chipmaker's results and forecast raised concerns about its growth.

That weighed on the chip index, which fell 5.8 percent, its steepest drop since March.

Citigroup was down 7.5 percent at $41.99, while Wells Fargo fell 4.6 percent to $48.29, after reporting largely in-line quarterly earnings.

Wynn Resorts was the among the very few bright spots, rising 7.4 percent to $55.29 after reporting in-line of quarterly revenue.

U.S. economic data on Friday was also not very encouraging, with an unexpected drop in retail sales and industrial output declining again in December, underscoring a worsening outlook for fourth-quarter economic growth.

“It depends on where we close today, but things could get worse before it gets better,” said Art Hogan, chief market strategist at Wunderlich Securities in New York.

Declining issues outnumbered advancing ones on the NYSE by 2,850 to 240. On the Nasdaq, 2,527 issues fell and 289 rose.

The S&P 500 index showed no new 52-week highs and 135 new lows, while the Nasdaq recorded four new highs and 477 lows.

Wall Street has worst day in four years, S&P now in correction


U.S. stock indexes plunged almost 4 percent on Monday as investors, rattled about China's economy, sold heavily in an unusually volatile session that confirmed the S&P 500 was formally in a correction.

The Dow Jones industrial average briefly slumped more than 1,000 points, its most dramatic intraday trading range ever, with key component Apple falling heavily only to claw back and end down 2.5 percent.

It was the S&P 500's worst day since 2011 and followed an 8.5 percent slump in Chinese markets, which sparked a sell-off in global stocks along with oil and other commodities .

Wall Street had stayed in a narrow range for much of 2015, but volatility jumped this month as investors became increasingly concerned about a potential stumble in China's economy and after Beijing surprisingly devalued its currency, the yuan.

Some investors unloaded stocks ahead of the close after looking to make money from volatile price swings earlier in the session.

“If things don't settle down in China, we could have another ugly open tomorrow and you wouldn't want to be caught holding positions you bought this morning,” said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin.

Apple's Chief Executive Tim Cook, in comments to CNBC, took the unusual step of reassuring shareholders about the iPhone maker's business in China ahead of a dramatic 13-percent drop and rebound in its stock, which closed down just 2.5 percent at $103.12.

The Dow Jones industrial average closed down 588.4 points, or 3.57 percent, at 15,871.35.

The S&P 500 lost 77.68 points, or 3.94 percent, to 1,893.21, putting it formally in correction mode.

An index is considered to be in correction when it closes 10 percent below its 52-week high. The Dow was confirmed to be in a correction on Friday.

The Nasdaq Composite dropped 179.79 points, or 3.82 percent, to 4,526.25, also in a correction.

Futures for Hong Kong's Hang Seng index were down 2.1 percent, suggesting that more bleeding may be in store when trading begins again in Asia.

The CBOE Volatility index, popularly known as the “fear index”, briefly jumped as much as 90 percent to 53.29, its highest since January 2009.

Preliminary data from BATS Global Markets show 1,287 trading halts on U.S. stock exchanges on Monday due to excessive volatility or tripping of circuit breakers, far more than usual.

The S&P 500 index showed 187 new 52-week lows and just two highs, while the Nasdaq recorded 613 new lows and eight highs.

“Emotions got the best of investors,” said Philip Blancato, chief executive at Ladenberg Thalmann Asset Management in New York.

“The conjecture that the Chinese economy can propel the U.S. economy into recession is ridiculous, when it's twice the size of the Chinese economy and is consumer-based.”

All of the 10 major S&P 500 sectors were down, with energy losing 5.18 percent.

U.S. oil prices were down about 6 percent at 6-1/2-year lows, while London copper and aluminum futures hit their lowest since 2009.

Exxon and Chevron each fell more than 4.7 percent. U.S. oil and gas companies have already lost about $310 billion of market value this year.

The dollar index was down 1.72 percent. It fell more than 2 percent earlier to a seven-month low as the perceived probability of a September U.S. interest rate hike receded.

Traders now see a 24 percent chance that the Federal Reserve will increase rates in September, down from 30 percent late on Friday and 46 percent a week earlier, according to data from inter-dealer money broker Tullett Prebon.

Wall Street's sell-off shows investors are becoming increasingly nervous about paying high prices for stocks at a time of minimal earnings growth, tumbling energy prices and uncertainty around a Fed rate hike.

Alibaba lost 3.49 percent to $65.80, below its IPO price of $68, making it the second high-profile tech company to fall below its IPO price in the past week after Twitter on Thursday.

Declining issues outnumbered advancers on the NYSE 3,064 to 131. On the Nasdaq, 2,632 issues fell and 281 advanced.

Volume was heavy, with about 14.0 billion shares traded on U.S. exchanges, double the 7.0 billion average this month, according to BATS Global Markets.

Buffett points the way


Warren E. Buffett is the second-richest person in the United States (after Microsoft’s Bill Gates), so when he purchased an Israeli-based stock not long ago, investors throughout the world sat up and took notice. What made it more newsworthy is that it was Buffett’s first major foray into overseas investing. Up to that point, he said he could always find good stocks here at home.

Then the Sage of Omaha’s company, Berkshire Hathaway, paid $4 billion for an 80 percent share of Iscar Metalworking, and he said at the time that he was looking for other low-priced jewels.

What drew him to Israel, Buffett said, was its brainpower.

“If you’re going to the Middle East to look for oil, you can skip Israel. If you’re looking for brains, look no further. Israel has shown that it has a disproportionate amount of brains and energy.”

For other investors looking to invest in Israel, but with perhaps not quite $4 billion to invest, there is a goodly variety of choices.

Israel’s economy actually has been doing well compared to those of many other countries, in part because the country did not have a credit bubble.

Andy Brown of Aberdeen Asset Management, which runs First Israel Fund, admits that inflation is something of a worry, but he argues that Israel’s “long-term fundamentals are strong. Israel has a young, growing, healthy population.”

Brown believes that a good time to invest in Israel is when political unrest has made stock prices a bargain. 

STOCK INDEX FUND

The Amidex35 Israel Mutual Fund consists of the 35 largest Israeli companies. It is a unique combination of stocks that trade on either the U.S. or Tel Aviv exchanges — the Tel Aviv Stock Exchange, the New York Stock Exchange, or Nasdaq (where smaller stocks trade).

Why “35”? Because 35 stocks have been found to provide 60 percent of the return of all Israeli stocks.

Why “Amidex”? It is a combination of a word for “friend” and “index.”

The fund is no-load (no sales charge), but if you sell within a year, there is a redemption fee.

Minimum first investment is $500, with $250 for follow-ups; for automatic investments, only $100.

For more information, call (888) 876-3566.

Amidex is setting up other index funds, such as the Cancer Innovations & Healthcare Fund.

Index funds over the years have done better than 70 percent or so of actively managed funds. In his book “What Works on Wall Street” (fourth edition, 2012), James P. O’Shaughnessy claims this is because index funds do not change their strategy. On the other hand, John Bogle, who started the Vanguard Group, attributes the success of index funds to their low expenses.

A CLOSED-END FUND

Unlike Amidex35, the First Israel Fund (ISL) does not issue new shares.

A limited number of shares trade among buyers and sellers. It is a “closed-end” fund, not an “open-end” one, such as Amidex35.

The advantage of this is that if shareholders decide to sell out, en masse, the fund does not have to raise cash to meet redemptions by selling its holdings, perhaps at hurtfully low prices.

The fund is not an index fund. The managers buy and sell Israeli stocks. It is a concentrated fund, with 75 percent of its assets in its top-10 holdings. The fund is overweight in information technology, particularly the stock Check Point Software. It is underweight in cyclical sectors, such as energy.

As with other closed-end funds, First Israel trades at a discount to its underlying value — right now, around 12 percent. Of course, shareholders may wind up selling their holdings at the same or a larger discount.

The fund trades on the New York Stock Exchange.

For more information, call (866) 839-5205.

First Israel Fund was launched in 1990 by Credit Suisse Asset Management, and it is headquartered in Philadelphia.

EXCHANGE-TRADED FUND

iShares Israel is an Exchange Traded Fund (ETF) — an index fund that trades as a stock. ETFs traditionally have very low expenses. In the case of this fund, expenses come in at 0.61 percent.

The fund follows an index called the Morgan Stanley Capped Investable Market Index. It was launched in March 2008.

iShares Israel holds 83 stocks but is tilted toward Teva Pharmaceuticals, which has 23 percent of its assets.

For more information, call (800) 474-2737.

INDIVIDUAL STOCKS

For investors interested in buying individual stocks, whether in Israel or elsewhere, Teva Pharmaceuticals may be a good bet. The Value Line Investment Survey rates its timeliness “above average,” and its analyst writes: “Despite the inevitable slowdown in the Copaxone franchise, we think Teva can still prosper in the years to come, assuming its growth strategy succeeds.” (Copaxone is a drug against multiple sclerosis.)

Amdocs Limited is rated average by Value Line, which writes that the stock “has decent 3- to 5-year appreciation potential.” The company provides information-system solutions.

Check Point Software is also rated average, and Value Line writes that the stock has “minimal appreciation potential out to 2016.”

Elbit Systems (defense electronics and electrical optical systems) “is a suitable choice for conservative, income-oriented investors with a long-term perspective.”

Ormat Technologies (alternative energy) is ranked below average in timeliness, but the stock, writes Value Line, may “appeal to patient investors looking for less risky (nonsolar) exposure to the alternative energy sector.”

Tel Aviv Stock Exchange plunges on U.S. credit downgrade


The Tel Aviv Stock Market experienced its largest one-day loss in nearly three years in reaction to the downgrade of the U.S. credit rating.

The exchange’s TA-25 benchmark index of 25 stocks fell 7 percent on Sunday to 1,074.27—the biggest drop since November 2008 at the beginning of the global economic crisis—despite a delayed opening by nearly an hour to allow traders to react to the news on the U.S. downgrade without pressure.

Standard & Poor’s on Aug. 5 downgraded the U.S. credit rating from AAA, the top designation it had held since 1941, to AA+.  The downgrade is likely to result in steeper interest costs on U.S. government bonds, eventually leading to less disposable income.

Analysts reportedly believe that Saturday night’s massive protests throughout Israel against the high cost of living also contributed to the plunge, Haaretz reported.

Since the Tel Aviv Stock Exchange operates Sunday through Thursday, it was one of the first stock exchanges worldwide to react to the U.S. credit rating downgrade.

Don’t Stress About Your Stock Portfolio


Back in the go-go years of the stock market, when it seemed that everyone was getting rich, a certain recently retired rabbi started buying shares in a handful of high-flying Internet stocks. The shares skyrocketed. The man bought more. Within no time, he became a millionaire many times over. Well, we don’t have to tell you what happened next. The bear market came, and stock selling for hundreds of dollars a share began selling for pennies.

“I had lost it all,” the rabbi said. “I went into depression. I even wondered if my life was worth living.”

Today, Rabbi Benjamin Blech, author of “Taking Stock: A Spiritual Guide to Rising Above Life’s Financial Ups and Downs” (AMACOM, 2003), wonders mostly how he ever got so frenzied about money — both its gain, and its loss. Of course, he is not alone. Perhaps you didn’t sink your nest egg into dot-com stocks, but chances are very good that money — or lack of it — sometimes throws you off kilter.

“Money is, without question, one of the biggest causes of anxiety and stress in our society,” said Dr. Robert Jaffe, a psychotherapist in Encino. “Fortunately, there are tools we can use to conquer that anxiety.”

Start with: What does money mean to you?

“Stress, of whatever kind, comes from fear. Stress over money is no exception. To deal effectively with that stress, you must know what it is you are truly afraid of,” Jaffe said. “For some of us, money represents security, so losing it would mean a loss of security. But for others, money may symbolize happiness, freedom or power.”

Question your core beliefs.

After you’ve made the connection between say, money and security, or money and happiness, ask yourself where that notion comes from.

“Many of our beliefs about money come from our parents,” Jaffe said. “Others come from the constant bombardment of advertising which says that our lives are somehow deficient, and that only by buying ‘stuff’ will we be fulfilled. But ‘stuff’ won’t ever fulfill you.”

In fact, a number of studies show that the rich — even those who own mansions, private jets and polo ponies — are, at best, only slightly happier than the rest of us.

“And many people with a lot of money are very unhappy,” Jaffe said.

Imagine the worst-case scenario.

Money can often tap into our fear of survival. But for most of us, even a sudden loss of most of our wealth — ouch! — would not jeopardize our survival.

“Try to picture a worst-case financial scenario, and be honest with yourself,” Jaffe said. “Say, for example, you were to lose your house. Could you still rent an apartment? OK, visualize yourself in that apartment. It’s not the end of the world. You’ll have less space, but you’ll also have less cleaning and straightening, and no lawn to mow, and no trash cans to blow away.”

Pinpoint the anxiety.

Brent Kessel, president of Abacus Wealth Partners, a fee-only financial planning firm in Pacific Palisades, is also an avid yoga practitioner. To combat money stress, Kessel suggests an exercise often used by yogis: “Sit quietly and ask yourself where in the body you are feeling the stress. Is it in your shoulders? Your gut? Is it a weighty kind of pain or a stabbing pain? Is it static or moving? There’s no answer in the observation,” Kessel said. “The answer is in the observation itself.” That may sound odd, he admits, but pinpointing the anxiety can often help control it.

Set the alarm clock.

“The very worst time to make a financial decision is when you are under financial stress,” Kessel said. “You may make a bad decision, which will then inevitably lead to more stress.”

He suggests that if you are feeling anxiety-ridden about money, put off all big decision making until tomorrow. If the decision can’t wait until then, at least wait five minutes. Set an alarm clock. Use the time to roll through the exercises above.

Value yourself for what you are.

“One day, back when my portfolio was a crazy obsession, my wife asked me why I was calling my broker so often. I told her that I wanted to know what I was worth. Right there, I had a revelation,” said Blech, the former dot-com millionaire. “I repeated those words to myself: ‘to know what I was worth.’ Ridiculous! I’m a rabbi, a parent, a teacher, a mate and lots of other things. I’m worth much more than my portfolio, regardless of its size…. And that’s true for every one of us.”

Russell Wild is both a financial journalist and a fee-only investment adviser based in Allentown, Pa.