Dow falls 600 points in final minutes of trading as January rally loses steam

The Dow Jones Industrial average tumbled more than 600 points on Wednesday as investors took profits on some of the strong 2023 January gains and as a disappointing December retail sales reading raised concerns about a recession. Shares of banks led the losses.

The Dow Jones Industrial Average fell 612 points, or 1.8%, while the S&P 500 lost 1.6%. The Nasdaq Composite lost 1.2% and was on pace for its first down day in the last eight.

Yung-Yu Ma, chief investment strategist at BMO Wealth Management, attributed the reversal to a combination of skittishness and profit taking.

“We’ve had such a strong start to the year, but now we’re amid a tense earnings season, recently got weaker data — retail sales and yesterday’s Empire State Manufacturing Survey. Plus the Fed meeting on Feb. 1st is looming large,” he said. “There’s not a whole lot of reason to get aggressive here, but all of those factors above suggest that caution is warranted in the near term.”

Microsoft announced plans to lay off about 10,000 employees, which hurt investor sentiment. The stock fell and dragged the Dow lower with it.

Investors were also digesting the latest retail sales data, which showed a drop of 1.1% in December, slightly more than the 1% forecast.

They also weighed the latest reading on the producer price index, which measures input costs from companies. The PPI showed a 0.5% decline for December. Economists surveyed by Dow Jones expected a 0.1% decline. That briefly gave relief to investors who have hoped for inflation to retreat and for the Federal Reserve to slow its rate-hiking campaign.

Investors have been enjoying strong upward momentum for stocks since the start of the year, although many have begun to doubt the market’s strength. The Dow is still higher by 1% for the month, while the S&P and Nasdaq are still up by 3% and 5%, respectively.