February 28, 2007 6:36 AM
Kaboom! Stocks fall down
Hey, it's only money.
The stock market suffered its biggest one-day decline since the first day it opened after the terrorist attacks of Sept. 11, 2001, reports David Milstead.
Tuesday's one-day drop of 416 points in the Dow, or about 3.3 percent, wiped out all of its 2007 gains. A drop in the Standard & Poor's 500 of close to 3.5 percent also left that index below levels seen on New Year's Eve.Investors in the broad market now are down for the year .
Markets opened to news of a 9 percent slide in Chinese stocks a day after its record high close. The Dow started falling sharply and got worse in late afternoon. Computer problems delayed the recording of trades, and the Dow dropped 178 points in a single minute just before 3 p.m. Eastern time.
Some analysts said it was an overdue correction in an overheated market. Among the factors in the drop:
A 9 percent slide in Chinese stocks, which came a day after investors sent Shanghai’s benchmark index to a record high close, set the tone for U.S. trading. The worldwide tumble was sparked by China’s plan to clamp down on illegal stock market investments. Chinese stocks slumped the most in a decade, while Europe’s Dow Jones Stoxx 600 Index dropped 3 percent and emerging markets sank. Russian shares slid from an all-time high; Brazil’s Bovespa Index lost 6.6 percent.
With an hour left before the close of exchanges, trading terminals showed the Dow average dropped 178 points in a single minute. Dow Jones & Co., which oversees the measure, later attributed the decline to a technical problems with its data servers.
Colorado stocks, including such high-profile companies as Crocs and Chipotle, took the hit as well.
The Bloomberg Rocky Mountain News Index, a price-weighted index of companies based in the state, dropped 12.87 to 395.42. That was the biggest daily percentage drop since June 28, 2004. Declining stocks outpaced those that advanced 97 to eight, with five unchanged.Crocs, the Niwot-based maker of a colorful line of casual shoes, dropped $3.58 to $48.48. Chipotle Mexican Grill, the fast-food chain McDonald's Corp. sold to the public last year, fell $3.38 to $60.25. Royal Gold, a Denver-based investor in mines operated by gold producers, fell $3.08 to $32.23.
Did your portfolio take a hit? Were you among the sellers? Did you buy anything when prices dropped? Do you think this is just a needed correction in the market? Does it make you more leery about being in the market?
February 28, 2007
7:05 AM
Anonymous writes:
The market goes up, the market comes down. There are normal corrections like the one yesterday. The stock market is no less gambling that going to Vegas, at least in some sectors, so if you can't stand the losses that might occur, find safer investments such as bonds, mutual funds, and retirement plans.
February 28, 2007
7:56 AM
gr8fuldude writes:
Stock value is a balance sheet item - that means that it shows on a company's or individual's statement of assets and liabilities. The only value lost is if the individual sold based on emotion of yesterday's overhyped and in some opinions' overdue correction.
If you are they type who will panic sell after one day, then the stock market is definitely not for you. The first rule in finance is that greater reward always carries with greater risk. Learn that, and get your head around that before you invest a dime.
All that said, I usually tell my students that any money invested in the stockmarket should not be money that you need tomorrow, next week or next year. Think of it as the money you will need decades from now, and do NOT get worked up over daily gains or losses. You'll live a lot longer without so doing.
February 28, 2007
9:07 AM
jay writes:
This "correction" simply shows how much power Greenspan still has over our economy. Over the weekend he released a statement saying that he believes the US will slip into another recession in late 2007. Therefore, we see the shake out in the market as a direct result of his opinion.
I've always believed that while Administrations and Congress has the ability to affect economic cycles through policy decisions...the cycles themselves are inevitable. The real question is are we better prepared for the inevitable now that we were the last time we went into a recession. With record debt and crippling deficits on top of dismal real wage and job numbers...I say our economic policies over the last six years have clearly hindered, not helped us prepared for the next downturn.
By the way...I couldn't agree with gr8tfuldude more...if you're going to throw money in the market...do it and forget about it for a decade.
February 28, 2007
9:25 AM
David (R) writes:
Jay said, ".... how much power Greenspan still has ......"
Yeah. I'm Jewish, and I wish he'd shut up. LOL. Not because he doesn't know what he's talking about, but because so many people "live or die" based on what he says.
Typically, investors are motivated by two things: greed, and fear - and part of the fear is putting too much stock in what might be outloud musings or conjecture from someone in a position of authority or trust. I lost about 4% yesterday, and some lost far more, some less. To me, it's just part of the workings, and I accept it as part of the risk. Otherwise it will make a person crazy.
February 28, 2007
9:47 AM
Michael writes:
I was a trader in 1987 when the market fell 500 points - and that was when the DOW was at 1200!!!! Now that was SCARY. 50% in a day. 400 points in a 12000+ point DOW was what???? 3%+ or so. I lost about 4% yesterday on my stocks and it looks like the market is back almost 100 points today already. Its not for the old or the faint hearted.
February 28, 2007
10:06 AM
Michael writes:
"With record debt and crippling deficits on top of dismal real wage and job numbers...."
Leave it to Jay to take any cheap shot he can at Pres Bush. The debt in aggregate numbers is greater than ever before - as is our country and our economy. But as a % of GDP and other measurements that put it into context, it is by no means "record". The same can be said of the word "crippling" in regard to our deficits. They are anything but. I see NOTHING crippled or hampered by our deficits. We still have the strongest economy in the world and the largest. Hardly crippled. Wages are what the market demands and the US has the lowest unemployment of any industrialized nation. Try france at about 10%+ if you want real unemployment. Cheap shots Jay...cheap shots and unsubstantiated at that.
February 28, 2007
10:28 AM
jay writes:
"They are anything but. I see NOTHING crippled or hampered by our deficits."
Well, fortunately for all of us, Greenspan and Bernanke disagree with you Mike.
February 28, 2007
10:32 AM
Anonymous writes:
So how are Bush supporters going to blame Clinton for this?
February 28, 2007
10:35 AM
gr8fuldude writes:
Michael - We can argue numbers and semantics all day, but you have to admit that NO organization or individual can spend more than they bring in for ANY prolonged period. It does not work at the individual level, the corporate level, nor at the government level. Sooner or later, the bill comes due with a vengeance. The real question is do we wish to deal with it, or do we want our kids to be more exponentially burdened.
February 28, 2007
12:15 PM
David (R) writes:
I'm wondering, how much of the discussed fiscal and monetary problems do we not see or feel because they are masked by external influences? For example, Fed policy of printing more money as they perceive it is necessary - hidden tax increases/decreases that impact corporate and consumer spending - government sales of public assets for income generation - and quite literally a hundred or more others.
February 28, 2007
12:45 PM
Hogar De Vuelta (العودة) writes:
So do we have any hot tips to take advantage of the irrational inexuberance?
February 28, 2007
12:58 PM
jay writes:
I don't think concerns shared by the best financial minds in the country about the sluggish state of our economy and the ever deepening impacts of our tax later and spend now fiscal policies qualifies as irrational inexuberance....
February 28, 2007
1:11 PM
history buff writes:
Hogar, don't speak too loudly. You will get spammed about penny stocks that are set to go through the roof.
According to the WSJ, yesterday's drop was partly caused by a severe drop in the Shanghai market. It shows how globalized the world economy is. If China cools off, it could cause cooling off in other countries. Also, Monday's WSJ carried three pages of articles about the real estate market, sub-prime lenders and banks having to post more reserves against potential losses from defaults, and the consequences on the greater economic picture.
The market looks good, but yesterday's move shows how easily people react to bad news. It makes you wonder about that intangible called investor confidence.
February 28, 2007
1:20 PM
Michael writes:
"NO organization or individual can spend more than they bring in for ANY prolonged period" - Gr8fuldude
You are correct in that assertion, but Jay likes to throw bombs at the President and hopelessly try to imply that even though the USA has the stongest, most vibrant, and responsive economy in the world, we are heading for a disaster. I just get sick of it. I am no fan of deficit spending or debt, but it is manageable. The govt takes in about $2.4 TRILLION dollars in OUR taxes every year and we are now spending $2.9 trillion. It is the spending that is the problem - and that lies mostly with entitlements, which the Democrats will never allow to be touched. I still remember them standing and cheering when they successfully BLOCKED any atttempt to just try to fix SS.
February 28, 2007
1:26 PM
Tree writes:
HB-
I'm betting China doesn't cool off. Take a look at this mutual fund I have a major chunk of my 401K invested. When I heard the news say China flushed it's toilet and the ocean disappeared I thought for sure Cheney started WW3 and seized our bank accounts. This baby is 100% China and it only lost 4.2% yesterday. But look what it's gained over the last year.
OBCHX
February 28, 2007
1:38 PM
gr8fuldude writes:
Tree -
Back at'cha:
OAKEX
February 28, 2007
1:53 PM
Anonymous writes:
Oh my, educated pot smokers found a couple of mutuals that are doing better than the S&P 500. And we thought that stuff causes brain damage.
February 28, 2007
2:06 PM
Anonymous writes:
Don't forget about those mutual fee's. Oberweiss isn't working on Wall Street for free.
February 28, 2007
2:06 PM
jay writes:
Mike,
You don't need to try to defend the fiscal policies over the last 6 years. They were horrible...and it's not unpatriotic or "throwing bombs" to say so...it's just recognizing fact.
February 28, 2007
7:36 PM
Anonymous writes:
Jay the ever blowing know it all jackass. Is there any subject you dont pretend to have all the answers about? You are an idiot. If you knew jack shit about stocks or trading you would know this is what is called Noise. And if you were paying attention, Bernake clearly isnt agreeing with you jackass, and Greenspan was misquoted and the misquote was perpepuated by Drudge. Get a life already
March 1, 2007
8:28 AM
Johnny Dividend writes:
Buy. Buy now. Take advantage of those less fortunate stocks and buy. The drop was a blessing in disguise (except for the Chinese, and that's mainly their government's fault for playing games with their currency and all that).
Regardless of whether we have a fiscally incompetent government (I think we do) or our economy is on the brink of collapse (I realy doubt it, but it's possible if this goes on much longer), this incident could be opportunity knocking.
March 1, 2007
9:05 AM
jay writes:
To coward at 7:36:
Education is your friend.
"A vicious cycle may develop in which large deficits lead to rapid growth in debt and interest payments" that could spark a "fiscal crisis, which could be addressed only by very sharp spending cuts or tax increases, or both,"
---Bernanke, 1/19/07
"The deficits pose a significant obstacle to long-term stability,"
---Greenspan 5/7/05