Investors in selling mood after market’s biggest five-day advance since 1932
By ANDREW MARKS 3 December 2008
Even in a year of historic highs and lows that would make even die-hard fans of roller coaster rides sick, Wall Street traders suffered through the indigestion of one of the biggest sell-offs in the history of the New York Stock Exchange on Monday.
Investors came back from the light volume rallies of the Thanksgiving Day holiday trading to the stock market in a selling mood following the market’s biggest five-day advance since 1932.
In what almost appears to be a case of ‘can you beat this?’, the Dow Jones Industrials sold off a whopping 7.7 per cent or 679.95 points, the fourth largest decline on a points basis since 1896.
‘Just another day of turbulence and uncertainty, with investors remaining in the herd mentality we’ve been seeing now for so long,’ remarked Ryan Larson, senior equity trader at Voyageur Asset Management of a day in which the S&P 500 and Nasdaq Composite also sank dramatically, losing 8 per cent and 9 per cent respectively.
‘Regardless of which direction the market goes, once the momentum starts everyone jumps on board. Nobody wants to be the last one on the boat,’ he said.
Does Monday’s sell-off, which wiped out most of the winning streak’s gains, also erase the hope that the five-day, 1,000-point-plus rally marked a turning point for the US stock market?
‘I don’t think so,’ said Larry Adam, chief investment strategist at Deutsche Bank. ‘We should continue to churn upwards off the lows we hit during the Citigroup crisis, but this market can’t sustain a huge bounce off the lows like the one we just had. It’ll be a lot of up and down with a tilt to the upside through the end of the year,’ he forecast.
That the day’s dramatic losses produced little hair pulling or panic on Wall Street is testament mostly to the degree to which huge swings have become more the rule, rather than a conviction that stocks are on the upswing.
After all, the largest decline ever was recorded on Sept 30, a 777-point bloodbath, and Oct 15 bore witness to the third-largest points decline, 733 points, coming just two days after the biggest single day advance ever, 936 points, and less than a week after what is now - after Monday’s plunge - the fifth biggest sell-off in history, a 678.9 point rout on Oct 10. That was the date stock market prognosticators were pointing to as the day US stocks bottomed in the midst of the financial crisis. That was until little more than a week ago, when the major indexes crashed through that low and a new bottom was declared.
The headline catalyst for Monday’s plunge was the announcement by the National Bureau of Economic Research, which officially declared that the US economy slipped into recession in December 2007.
Stocks in Europe and Asia were severely impacted by the news as well, which was underscored by grim economic data from around the globe.
In the US, the Institute for Supply Management reported its manufacturing index fell to 36.2 in November, the weakest reading since 1982. Similar declines in manufacturing were reported in China and Europe.
Japan’s Nikkei tumbled 533 points, or 6.35 per cent, and Hong Kong’s Hang Seng Index fell 5 per cent in the wake of the US market’s tumble and evidence of accelerating deflationary trends.
In Europe, however, stocks were mostly recovering yesterday after suffering big losses on Monday, with London’s FTSE gaining 0.5 per cent following a 5.2 per cent fall on Monday, and Germany’s DAX rising 1.4 per cent after a 4.9 per cent retreat.
‘Monday’s sell-off was just the reverse of the rally of last week, with people coming back from the holiday looking to sell into the rally and book some profits,’ said Mr. Adam.
‘Last week, stocks soared on a lot of new information, even though some of it was bad news. Yesterday, we digested a lot of old news, with the official declaration of a recession that everyone knows we’ve been in for months. It was more an excuse to take money off the table in a very uncertain market,’ he said.
Mr. Adam and other market strategist expect the rally in the US to resume. ‘The recession announcement and manufacturing data were already baked in on a fundamental basis, and we even had better than expected news out of the retail sales for Black Friday and holiday weekend shopping, so I see investors willing to put some cash to work,’ he said.
Indeed, stocks were climbing as the opening bell sounded on the New York Stock Exchange, albeit at a more modest pace than the futures market had indicated due to a profit warning from General Electric.
The Dow rose 60 points, or 0.75 per cent in the first minutes of trading. After the first half-hour, the bluechip index was up only 13 points, or 0.16 per cent, at 8,162.5, while the S&P 500 was advancing three points, or 0.38 per cent, and the Nasdaq was gaining 5.4 points, or 0.39 per cent.
‘We could see a December rally that gets us another 10 per cent higher, but sentiment will continue to rule the markets for at least the next six weeks and maybe longer, and the high volatility that entails limits my conviction about how much we go up from here over the next three months,’ said Mr. Adam, sounding a cautiously optimistic note.
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Volatility Returns as US Stocks Plunge 7.7%
Investors in selling mood after market’s biggest five-day advance since 1932
By ANDREW MARKS
3 December 2008
Even in a year of historic highs and lows that would make even die-hard fans of roller coaster rides sick, Wall Street traders suffered through the indigestion of one of the biggest sell-offs in the history of the New York Stock Exchange on Monday.
Investors came back from the light volume rallies of the Thanksgiving Day holiday trading to the stock market in a selling mood following the market’s biggest five-day advance since 1932.
In what almost appears to be a case of ‘can you beat this?’, the Dow Jones Industrials sold off a whopping 7.7 per cent or 679.95 points, the fourth largest decline on a points basis since 1896.
‘Just another day of turbulence and uncertainty, with investors remaining in the herd mentality we’ve been seeing now for so long,’ remarked Ryan Larson, senior equity trader at Voyageur Asset Management of a day in which the S&P 500 and Nasdaq Composite also sank dramatically, losing 8 per cent and 9 per cent respectively.
‘Regardless of which direction the market goes, once the momentum starts everyone jumps on board. Nobody wants to be the last one on the boat,’ he said.
Does Monday’s sell-off, which wiped out most of the winning streak’s gains, also erase the hope that the five-day, 1,000-point-plus rally marked a turning point for the US stock market?
‘I don’t think so,’ said Larry Adam, chief investment strategist at Deutsche Bank. ‘We should continue to churn upwards off the lows we hit during the Citigroup crisis, but this market can’t sustain a huge bounce off the lows like the one we just had. It’ll be a lot of up and down with a tilt to the upside through the end of the year,’ he forecast.
That the day’s dramatic losses produced little hair pulling or panic on Wall Street is testament mostly to the degree to which huge swings have become more the rule, rather than a conviction that stocks are on the upswing.
After all, the largest decline ever was recorded on Sept 30, a 777-point bloodbath, and Oct 15 bore witness to the third-largest points decline, 733 points, coming just two days after the biggest single day advance ever, 936 points, and less than a week after what is now - after Monday’s plunge - the fifth biggest sell-off in history, a 678.9 point rout on Oct 10. That was the date stock market prognosticators were pointing to as the day US stocks bottomed in the midst of the financial crisis. That was until little more than a week ago, when the major indexes crashed through that low and a new bottom was declared.
The headline catalyst for Monday’s plunge was the announcement by the National Bureau of Economic Research, which officially declared that the US economy slipped into recession in December 2007.
Stocks in Europe and Asia were severely impacted by the news as well, which was underscored by grim economic data from around the globe.
In the US, the Institute for Supply Management reported its manufacturing index fell to 36.2 in November, the weakest reading since 1982. Similar declines in manufacturing were reported in China and Europe.
Japan’s Nikkei tumbled 533 points, or 6.35 per cent, and Hong Kong’s Hang Seng Index fell 5 per cent in the wake of the US market’s tumble and evidence of accelerating deflationary trends.
In Europe, however, stocks were mostly recovering yesterday after suffering big losses on Monday, with London’s FTSE gaining 0.5 per cent following a 5.2 per cent fall on Monday, and Germany’s DAX rising 1.4 per cent after a 4.9 per cent retreat.
‘Monday’s sell-off was just the reverse of the rally of last week, with people coming back from the holiday looking to sell into the rally and book some profits,’ said Mr. Adam.
‘Last week, stocks soared on a lot of new information, even though some of it was bad news. Yesterday, we digested a lot of old news, with the official declaration of a recession that everyone knows we’ve been in for months. It was more an excuse to take money off the table in a very uncertain market,’ he said.
Mr. Adam and other market strategist expect the rally in the US to resume. ‘The recession announcement and manufacturing data were already baked in on a fundamental basis, and we even had better than expected news out of the retail sales for Black Friday and holiday weekend shopping, so I see investors willing to put some cash to work,’ he said.
Indeed, stocks were climbing as the opening bell sounded on the New York Stock Exchange, albeit at a more modest pace than the futures market had indicated due to a profit warning from General Electric.
The Dow rose 60 points, or 0.75 per cent in the first minutes of trading. After the first half-hour, the bluechip index was up only 13 points, or 0.16 per cent, at 8,162.5, while the S&P 500 was advancing three points, or 0.38 per cent, and the Nasdaq was gaining 5.4 points, or 0.39 per cent.
‘We could see a December rally that gets us another 10 per cent higher, but sentiment will continue to rule the markets for at least the next six weeks and maybe longer, and the high volatility that entails limits my conviction about how much we go up from here over the next three months,’ said Mr. Adam, sounding a cautiously optimistic note.
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