Dow Plummets 318 Points on Uncertainty Abroad

The stock market index plummeted this week, thanks to weak data from China.

Specialist Peter Kennedy is reflected in one of the screens at his post on the floor of the New York Stock Exchange on Thursday, Jan. 23, 2014.
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Stocks slipped yet again Friday to close out a disappointing week, with the Dow Jones industrial average falling by 318 points.

Friday's drop followed Thursday's decline of 176 points, and the Dow ended the week 3.8 percent below where it opened on Tuesday. Meanwhile, the Standard & Poor's 500 index posted its second straight day of declines, dropping nearly 38.2 points, or nearly 2.1 percent, on Friday.

Friday's Dow decline made it the index's worst day since June, and the week as a whole was the market's worst since 2011, CNN reported.

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This week's stock swoon was driven in part by disappointing data out of China. On Thursday, that country's Purchasing Managers' Index fell from 50.5 to 49.6, suggesting that the manufacturing sector in China is contracting.

In addition, the Federal Reserve's recent decision to taper its monthly bond purchases has caused shakiness, particularly in emerging economies. Those purchases had driven interest rates downward, which sent investors seeking out higher returns both in the stock market and abroad. Now that higher returns might be available in the U.S., the opposite could happen, as the Financial Times has explained. On Thursday, both the Argentine peso and the Turkish lira fell in value.

The stock market has been on an upward climb since the dark days of the Great Recession and performed particularly well in 2013, as policies like the Federal Reserve's third round of quantitative easing pushed stocks higher. In part because it's been more than two years since the stock market had a correction – defined as a stock market drop of more than 10 percent – some watchers have predicted a correction in 2014.

Next week, the Federal Reserve will meet to discuss whether to further taper its monthly asset purchases, currently at $75 billion. Depending on what the nation's central bank decides, it could send stocks either tumbling or rising in response.

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