Weekly market review
Stocks ended low on the week despite a rally on Friday. Stocks sharply declined early in the week, sending major indices to levels last seen in the summer. This represents a nearly 10 percent drop in the S&P 500. Drops of 10 percent or more are usually considered market corrections which can indicate a bear market or recession. Ten percent drops occur on average about once per year. This pullback has offered investors an opportunity to buy fundamentally positive stocks at lower prices.
Contributing to the decline was the death of a Dallas nurse who contracted Ebola.
On Wednesday, fears increased after the news that another nurse was infected. This had the greatest effect on airline stocks as investors sharply sold off their holdings in anticipation of reduced travel.
Investors continued to worry about slowing growth in Europe and China and other negative market data. A decline in consumer spending took investors by surprise and contributed to Wednesday’s selling. Investors also speculated about the possibility of a recession in Europe, leading to a drop in oil prices.
On Thursday, investor sentiment became positive, fueling a rally that lasted through Friday. This came from news that the Fed may taper its monthly asset purchases, a symbol that they will continue to support equity markets. Most analysts believe the pullback does not indicate further declines and that the overall investment environment remains positive.