U.S. stocks closed steeply under water on Friday, with Wall Street recording its worst month in more than a year and first monthly loss since August, as investors compiled a list of worries that now include emerging markets.
"The emerging market currency influence and volatility that goes into that probably plays out into the next couple of trading days," Jim Russell, senior equity strategist for U.S. Bank Wealth Management, said of the declines seen in the currencies of countries including Taiwan, Russia and Turkey that have come with signs China's economy is slowing.
Dependence on China as an export market and the tendency for the U.S. dollar to rise as the Federal Reserve tapers its asset purchases are both negative for emerging markets, while "the U.S. looks that much more stable and fundamentally superior to other global economies," said Russell.
"We do think the decline in the U.S. markets will be confined. We don't sense a wipe-out or dramatic decline is at hand here. Investors perhaps have gotten spoiled into thinking the market only goes in one direction," Russell added.
"When we haven't had any significant corrections, it doesn't take much," Randy Frederick, managing director of active trading and derivatives at Charles Schwab, said of the market's swoon.
After a 231-point decline, the Dow Jones Industrial Average dropped 149.76 points, or 0.9 percent, to 15,698.85, with Chevron leading blue-chip declines after reporting earnings that disappointed investors. The index was off 1.1 percent for the week and 5.3 percent in January.
Investors are starting to realize there is "selective value out there," said Russell of equities recouping a sizable portion of their early losses on Friday.