- Stocks fell an average of 3%, mirroring losses elsewhere in the world.
- Financials, energy and tech were all hit hard.
- The correction is not yet as bad as that of 2011.
Corrections tend to come on fast, and hard. The current bull market has had a number of them. The worst though, came in 2011, when major European countries seemed on the brink of default. The Dow Jones fell from almost 12,700 to 10,700 very quickly, a fall of over 18%. The damage took a few months to repair but by February we were off to the races again.
The latest fall has been similar, the Dow falling from a recent peak of 18,200 to its close yesterday of about 16,000. Sounds worse, 2,200 points. But on a percentage basis we’re talking 13%. We can go down another 5%, to 15,300, before we will even make the 2011 mark, on a percentage basis.
As we'd predicted in yesterday's daily news post, the final numbers from yesterday showed the Dow down 2.94%, 469.68, to finish at 16,058, the S&P 500 down 2.96%, 58.33, to finish at 1913, and the NASDAQ down 2.94%, 14.40, to finish at 4,636. Oil gave up all the previous day’s gains, with West Texas Intermediate dropping to $45.04/barrel, down 8.46%, and Brent dropping to $49.17, down 9.2%. The dollar even fell against other currencies, dropping to $1.13 against the Euro and 119.7 against the Yen.
Still, the word on the street remained, don’t panic. Oil will go back up, lifting the energy sector. The dollar is not collapsing. China will find its footing, somewhere, once the government accepts that it can’t control markets. Within a few months things should be OK.
Meanwhile, Check Your List Of Stocks
Meanwhile, this is a good time to check your own list of stocks you would buy if they got to a specific price, and see how many have gotten there. This is why investors should always keep some cash around. It’s also why it helps in bull markets to ask, “Would I buy this stock at this price” and if the answer is no, consider selling it. Otherwise, just relax. The market recovered from its 2007-2009 crash by early 2013. If you panicked you have missed one of the greatest bull runs in history.
Not everything was tossed away yesterday. American Airlines (NASDAQ:AAL) was up for most of the day and Discovery Communications (NASDAQ:DISCA) rose a whopping 6%. But these were “dead cat” bounces –the stocks have been much lower this calendar year, Discovery by 25%.
Otherwise, the day was a rout from beginning to end, and things got worse in the late afternoon. Apple (NASDAQ:AAPL) was down 4%, to $108.40, Disney (NYSE:DIS) was down about 2% and finished below $100, while Amazon (NASDAQ:AMZN) fell 3% and finished below $500. You couldn’t hide in the energy trade either, with Exxon-Mobil (NYSE:XOM) down 4%, Whiting Petroleum (NYSE:WLL) down 5.4%, and Cheniere Energy down 3.7%. If you were in big banks you also suffered – JP Morgan (NYSE:JPM) lost over 4%, Bank of America (NYSE:BAC) was down over 4.5%, and Citigroup (NYSE:C) was down 5%.
Asian Stock Markets Warned Investors Of A Bumpy Ride
Asian stock markets warned investors it was going to be a bumpy ride before they got in. Japan’s Nikkei fell 3.84%, the Hang Seng index in Hong Kong was down 2.23%, and India’s Sensex dropping 2.2%. Most traders ignored Shanghai’s smaller, 1.2% drop as the credibility of Xi Jinping’s government took another blow.
Things were just about as bad in Europe. The German DAX finished down 2.38%, the French CAC-40 finished down 2.40%, and England’s FTSE, which had been off Monday, catching up to finish off 3.03%.
So What Happens In The Markets This Morning?
Chances are good that at some point you’ll hear people getting a hearing with some especially gloomy predictions, like a Dow below 10,000 or a complete economic collapse. Gold bugs may claim we have lost our faith in all currencies.
That is where you want to step in and buy. Central banks on a global basis won’t allow that. They’re going to replace the funds that disappeared in the global washout. People will continue to trade and the Earth will continue to spin on its axis.
I strongly suspect we’re closer to the end of this thing than the beginning.