Why the stock market took a dive Wednesday
The Dow fell 185 points as the autumn swoon continues. Partly, the slide was due to worries that President Obama and Congress can't cut a deal to fix the fiscal cliff. But other factors were at play.
Good question on a day when the Dow Jones industrials ($INDU) suffered its third loss of more than 100 points in the last six sessions, and the Nasdaq Composite Index ($COMPX) has fallen more than 10% since mid-September, the popular definition of a correction.
The answer is more complicated than simply the fiscal cliff or Barack Obama's reelection, although the former was clearly at play today. President Obama insisted at a news conference he would not agree to extend Bush-era tax rates on the wealthy. Republicans says they won't agree to boosting top tax rates, and the question is which side will blink first.The result today was that the Dow fell 185 points to 12,571. The Standard & Poor's 500 Index ($INX) dropped 19 points to 1,355, and the Nasdaq was down 37 points to 2,847.
The Dow and S&P 500 have fallen 7.5% since their 2012 peaks on Sept. 20 and Sept. 14, respectively. The Nasdaq is down 10.6% from its Sept. 14 peak. The Nasdaq-100 Index ($NDX), down 30 points to 2,532 today, has fallen 11.6% since peaking on Sept. 19. Yes, that means the Nasdaq-100 is in correction, too.
Here are five more reasons that fill out the picture.
Apple's fall from grace is affecting everything. Apple (AAPL) is down 23% from its closing high on Sept. 23. It represents 4.2% of the S&P 500 and 17% of the Nasdaq-100. If it sneezes, a lot of others get hit. Cirrus Logic (CRUS), an important Apple supplier, is down nearly 32% since peaking in September. Nvidia (NVDA), whose chips help power in the iPad and Macintosh computers as well, is off 16%. Broadcom (BRCM) is down nearly 17%.
In fairness to Apple, the stock was grossly overbought in September and more than ready for a sell-off. So were Amazon.com (AMZN) and Google (GOOG) for the matter. In fact, Amazon is down 14.7% since Sept. 14; Google is off 8%.
Hurricane Sandy is upsetting expectations. Retail sales fell 0.3% in October, the Commerce Department said today. Analysts believe that Sandy looks to be a big reason for the decline, if only because around 20% of all U.S. retail sales are generated in the middle-Atlantic states. Revisions may change the estimate, but the decline was a decline, and investors were dismayed. One other factor in retail sales: Gasoline prices fell 7% during the month. Investors may be cheered by November sales, which will reflect some of the spending required to repair everything Sandy damaged.
Geopolitical concerns erupted again. Israeli forces launched aerial assaults on Gaza today. Some 20 targets were hit, and the top military commander of Hamas was killed. Israel insisted the strikes were in response to recent rocket attacks. The strikes drew condemnation from Egypt and escalated the risks of a new war in the Middle East. Crude oil (-CL) in New York jumped to as high as $86.65 before falling back to $86.32. Brent crude hit $109.30 a barrel but pulled back below $108.65, a gain of $1.31. Gold (-GC) was up $5.30 to $1,730.10 an ounce.
Europe is a mess. We know the wrangling over how to straighten out the euro debt crisis is far from over. And investor frustration looks to be building. Germany's benchmark Xetra Dax Index ($DE:DAX) is down 2.2% this month and 4.2% since mid-September. France's CAC-40 Index ($FR:PX1) is off more than 5% since mid-September. We don't know if Greece's government will run out of cash at the end of the month. It's a possibility.
European worries have pushed the dollar higher against the euro. A rising dollar makes U.S. exports more expensive to non-U.S. customers. The U.S. Dollar Index is up 1.3% this quarter and 0.7% this year. The index measures the greenback against a basket of currencies, with the euro the biggest factor. The index was flat today, but nearly half of the Dow's loss today came from five stocks: IBM (IBM), Caterpillar (CAT), Boeing (BA), Chevron (CVX) and Home Depot (HD). The first four have huge businesses outside the United States.
How will this downturn end?
Let us assume -- as most people do -- that no one wants the country to go over the fiscal cliff -- the imposition of federal spending cuts and increases in income tax rates. So, a rally should erupt when it appears a deal is at hand. The market overall is primed for a rally. The major averages and the Nasdaq-100 are all oversold by many measures.
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Among many proposals in Obamas tax/fiscal plan, all cotaining perks for his supporters, are canceling deductions for home mortgages, takers dont own homes, doing away with charitable contributions, takers dont make charitable contributions, forgiving student debt, not many are working. I could make this into a book.
His rich celebrity supporters dont have enough sense to realize the impact on their incomes and loss of incentives to make movies in the U. S.
Each day the tally increases of companies planning layoffs, closing plants, reducing weekly work hours to keep from complying with health care mandates, forming new divisions with under 50 employees rather than expanding existing corporate structures, moving capital overseas for new production facilities, developing long range plans that favor the largest markets in the world, China-1.3 billion population-India 1.2 billion population followed closely by Russia and Brazil.
The reality that most americans havent come around to is that Obama doesnt care as long as the government expands to a point of control of resources that it cant be reversed. Unemployment rates among his key support groups, minorities, youth, women, etc.. in the end didnt matter in the election because they perceived he will GIVE them something.
If anyone thought he would moderate in his second term, the last few days should put all that to rest as delusion. In the end, the makers have the ultimate power-they have the money and are already moving it to where it is treated best. Our own country was founded by people seeking kinder terms for their love of freedom and expectation of reward for individual effort and freedom of choice. This is a divine endowment and while it may be suppressed in the short term, ultimately this yearning will flow where it can be actualized.
For those who differ with my perspective, please identify ONE single member of his cabinet that has a background including self reliance or having built an enterprise outside of predatory favors from public service or some exemption for being a minority.
Smart is not the same thing as wise. Hitler and Stalin were smart, Lucky Luciano and John Gotti were smart. Lincoln, Roosevelt, Einstein, Churchill-WISDOM.
I think that the sooner the Republicans give the President "everything" he wants/demands, the better. "you want this?" "you got it"......"you want that?" "you got it".....
Then all of us should take a good look in the mirror and hopefully, a lot of us own property in another country.
I have been betting against a recovery ever since Obama got elected. Although I voted for Romney, my portfolio has surged since the election. At least I didn't have to re-engineer everything.
The stupid Obama handout crowd will never understand that they will always be at the bottom of society no matter who wins or promises them anything.
Another thing, anyone that pretends to know why the stock market dives or flourishes, and if you believe it, you and they need a doctor. If they do know, they will be instant millionaires. The ONLY reason people invest in the market is a positive expectation about the future. Its called confidence.Aside from the flash/instant trading initiated by computers, the market is a casino. You and I as individual investors dont stand a chane against a scientific computer with alogrithmic equations.
For the simple minded like me, I am not willing to risk any amount knowing people like Madoff, John Corzine, Stanford, etc are stewarding my money. especially given the ineptness of the regulatory agencies watching out for us.Are you kidding me? The simplest observation by Markopolis,the whistleblower on Madoff went unnoticed by the regulators for YEARS, DECADES. It was-THE MARKET GOES UP, THE MARKET GOES DOWN, IT DOES NEITHER INDEFINETLY
BUY LAND-DIFFCULT TO STEAL AND NO MORE BEING MADE.
Landman1, you do prove a point I've known for over 40 years; Liberals give themsleves too much credit for their intelligence. Just a week after the election and we are back to blaming Bush. Let us not forget what led up to the Bush era, the much inflated .coms during the Clinton years. And lets not forget a little thing called 911, or the housing and lending debacle (led by the Democrats).
Different subject; am I the only one that heard the President in the debates when he proudly said oil imports are at an all-time low? Need to look at increasing oil imports to ease price at the pump. Need to have a correct balance so as to not hinder the production of our own resources. Also, a new refinery would be nice; near where I live, a proposal to build a new refinery near Mobile AZ, was shot down. Would have been the 1st new refinery in over 25 years. Would be amazing what an extra $100 a month in the pockets of workers could do if circulated in the economy on something other than gas.
After the election the true progressive cesspool is revealed in this administration.
I VOTED FOR OBAMA --- as I said before --- to cook them and all their supporters for the next 4 years. MAN --- we are off to a flying start.
By the time the heat is turned off, Obama is going to look like Don King coming out of a Maoist re-education camp.
TO WIT: The former Director General of the BBC [Boys Being Cocked - aka: Pedophilia Central], Mark Thompson, is now going to be CEO of the New York Times.
Like I said --- let's keep rolling baby --- the dam of lies is bursting and we are going to crush these guys.
IT'S "ALL IN" BABY !
In a system where choice is the prevailing component, there will be inequities that result from the dynamics of choice and freedom.Victims are rare, volunteers
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