The Biggest Losers

It was another rough day on Wall Street yesterday, as the S&P 500 fell by 3.8 percent and the Dow Jones industrial average fell 4.1 percent. All 30 stocks in the Dow declined on the day.

Incredibly, four of the Dow 30 have lost more than 10 percent of their value already this year. They include:

• General Electric, down 17.2 percent
• Procter & Gamble, down 12.7 percent
• American Express, down 11.0 percent
• Chevron, down 10.3 percent

But all of those look better than the biggest loser in the S&P. Chesapeake Energy has lost more than a quarter of its value - declining 28.8 percent - since the beginning of the year.

Looking Forward From the Rout

The stock market's dramatic drop on Monday may scare some investors away from Wall Street for a while. But if history is any guide, it shouldn’t. According to the WSJ Market Data Group, there have been 131 sessions in the history of the S&P 500 with a 4 percent drop, as occurred on Monday. A month after a 4 percent drop, historically speaking, the S&P 500 is higher 54 percent of the time, and gains an average of 0.87 percent over that period.

The odds are only slightly better on a three-month basis—the return has been positive 56 percent of the time.  But the gains are significantly higher, with an average advance of 6.11 percent, which would be enough to erase the day’s drop.

Six months after a 4 percent drop, the S&P is higher 63 percent of the time, gaining 7.31 percent over that period. Over the course of a year it is up an average of 16.48 percent, and it is positive in 62 percent of such periods.

The Labor Theory of the Market Rout

Was the rout in the stock market caused by rising wages? That's one theory. A Labor Department report of rising U.S. wages last week fed market inflation fears and may have kicked off the market's swoon. But a deeper look at that report raises questions about whether wages really are rising in such threatening ways.

Average hourly earnings for all private-sector workers increased 2.9 percent in January from a year earlier, the best gain since June 2009. But the gains aren’t very widespread. A separate gauge showed that wages for nonsupervisory workers, who account for around 80 percent of employment, rose just 2.4 percent for the year ended January, in the range that’s prevailed for several years.

This isn’t the first time managerial workers have seen a big uptick in monthly pay. Wages for this group rose 1.2 percent last February and 1 percent last July, pushing overall wages up 0.3 percent in both months, But that pace wasn’t sustained in the following months.

The Rout

Here's what's been going on in the stock market:

• The Dow ended yesterday down 1,175 points, the largest one-day point decline on record. Given the lofty levels the index is at, though, that's a little misleading. The drop was 4.6 percent, the largest such move since August of 2011.
• The rout wasn't quite as bad for the S&P 500 index. The S&P 500 fell 113 points, or 4.1 percent, its largest percentage decline since 2011. 
• Both the Dow and S&P 500 have erased their gains for the year. The Dow is down 1.5 percent and the S&P 500 is down 0.9 percent. The Nasdaq is still up 0.9 percent.
• Boeing, which has been the driving force behind the Dow’s gains over the last year, turned to its biggest drag on Monday, wiping 138 points from from the index.  
• Still, given how much the market has risen in recent months, the Dow and S&P are only at their lowest levels since December 8 and December 7, respectively.

The High Cost of the Super Bowl

Did you go to a Super Bowl party yesterday? According to surveys, 18 percent of American adults had plans to host such a party, and they probably set the hosts back a fair amount.

On average, organizing a Super Bowl party set back hosts some $207, according to a survey of 1,000 people conducted by personal finance website LendEDU. Of that, over a third (35 percent) went toward food and non-alcoholic beverages, while 28 percent was spent on alcohol. The rest of the money was used to purchase decorations, fan gear and other items. 

Even those who didn’t host a watch party were still likely to spend a lot of money yesterday. American adults watching the showdown between the Patriots and the Eagles were expected to spend $81 each on average, or $15.3 billion total, according to the National Retail Federation. That’s up 8.5 percent from last year, but down slightly from the all-time high set in 2016.

January's Jobs Report

U.S. employers added 200,000 jobs in January, starting 2018 on a slightly better pace than last year. Employers added an average of 181,000 jobs a month in 2017. Overall, the pace of hiring has gradually slowed each year since 2014, consistent with a tighter labor market in the later stages of an economic expansion.

The headline unemployment rate remained at 4.1 percent for the fourth consecutive month, matching the lowest level since late 2000. The unemployment rate hasn’t fallen below 4 percent since December 2000, when it was 3.9 percent.

Construction, manufacturing and restaurants all showed strong job growth. Government payrolls grew by 4,000 last month. Average hourly earnings rose by 2.9 percent from a year earlier, the most since June 2009.

What Does January Mean?

It's been a great first month of 2018 for the stock market. The Dow Jones Industrial Average rose by 5.8 percent in January, while the S&P 500 index registered a 5.6 percent increase. The Dow produced its best January return since 1989, and the S&P 500 notched its best January since 1997.

That is a good omen for the rest of the year as well. According to the WSJ Market Data Group, on the previous occasions that the Dow has registered a return of 5 percent or more in January, it has closed out that year with a gain 83 percent of the time, or 20 out of the past 24.

The S&P 500 shows a similar pattern. It has finished the year in positive territory 78 percent of the time, or 14 of 18 occasions, when it registers a January return of 5 percent or better.