“Nobody knows why the Dow dropped 345 points today” was the headline on Bloggingstocks.com. The bottom dropped out of the Dow today- 344 points to close at $11,188!- and speculation is flying about why. All three indices- the Dow, NASDAQ, and S&P 500- fell back into bear markets.
A lot of data was slotted to come out this week, and today’s data showed that initial unemployment claims, and therefore people recently laid off, have risen to a near 5 year high. But retail store sales are up and oil dropped $1.46 to $107.89, a 5-month low. Oil has lost $40 in two months. So why did the market plunge today?
Conspiracy theorists think the rich of the world sold off for a reason and are keeping tight-lipped about why. Maybe it was a hedge fund sell off. A story came out yesterday predicting the fall of many hedge funds because commodities are falling. Maybe it’s just a manifestation of the extreme volatility the market has seen this summer. Bill Gross, the head of Pacific Investment Management (PIMCO), recognized and announced August’s light trading volumes, and warned of an imminent “financial tsunami”. Maybe this scared people? What the heck is a financial tsunami? Was today’s selloff a reflection of a weakening global economy? The dollar is up to its highest against the euro since the year began, and it now takes just $1.43 to get one euro. The euro was created, in part, as a similar exchange to the US dollar, but $1.43 is a great improvement from the $1.5903 it would have taken to get one euro on July 15. And isn’t it true that if the US economy improves it will lead the world back out of the hole?
Maybe Sarah Palin’s dirty nomination speech made everyone run. “When [Obama] you’re done parting the waters and healing the world…”? Was she serious? Maybe when she’s done slinging mud she’ll focus on what she’ll do about the desperate economy and enormous national debt.
It’s unclear what happened today, but what I know for myself is that I lost $300 today when the Dow lost 345, and I gained $1,000 yesterday when the Dow gained just 15. Five of my financial stocks- PMI, RDN, ABK, SCA, and MTG- had double digit gains yesterday, so I expected a selloff today; but I expected it to be a lot worse than it was after [fighting my internet connection and finally] seeing that the market took such a hit today. National City’s (NCC) rating was cut today by S&P but the stock price fell less than 6%! First Horizon’s (FHN) rating was also cut, and its stock price fell just over 6%. If I can make large gains when the market makes small ones, and have medium losses when the market has big ones, then I’ll be sure my experiment is working.
Data on the total unemployment rate comes out tomorrow, and it is believed to be at 5.7%. Will this data spike the market again? A lot of questions are unanswered.
It’s easy to read between the lines that I’m voting for Barack Obama, but to stay aware of both sides, I have been watching speeches from both sides and John McCain’s speech scared me tonight. By the end of his speech, it seemed that if he had a gun he would have started popping caps in the air. I’m not sure I’d feel safe with him in the same room as the red phone and bomb button.
In the hopes that Mary Caraccioli had some insight into today’s market, I stayed up past McCain’s speech and then past Comcast Channel 3’s insightful commentary on McCain’s speech to catch Money Matters Today. It’s usually on at 11PM (and rerun the next day at 11AM) but to my dismay, the show was completely run over by the McCain commentators and was not pushed up to a later time. The sports show Out of Bounds came on instead. Typical. I guess tomorrow will be a complete surprise.
