How low can the market go?

A huge market sell-off raises new questions about support levels.

By Kim Peterson Aug 4, 2011 3:10PM

Updated at 4:40 p.m. ET


The market sell-off was in full force Thursday as investors found themselves unable to shake off fears about the economy and the possibility of another recession.


The Dow Jones Industrials ($INDU) plunged more than 500 points at the close, with the Nasdaq ($COMPX) falling 5% and the Standard & Poor's 500 Index ($INX) also diving nearly 5%.


The day, coming after a difficult two-week span, again raised more questions about the long-term future of the stock market. And one question was foremost on everyone's mind: How low can we go?

August is traditionally a blah month for stocks, and there was an expectation that we'd head into the doldrums. But a plunge like this certainly disfigures the big picture, and on Thursday market observers were revising their forecasts for how low this thing could go.

Support for the S&P 500 fell through some key technical levels, with the index closing the session at 1,200.


Everything Friday will hinge on the July nonfarm payroll report, due out before the market opens. Analysts are expecting to see 85,000 net positions filled and an unemployment rate stuck at 9.2%. Any variation from that in either direction should elicit a dramatic response from the market. And if that payroll number happens to be negative? Well, that's when sobbing in a fetal position seems like a good idea.

Sounds like Wall Street is expecting bad news, and certainly some of those worries factored into Thursday's sell-off. July likely wasn't a great month for hiring, particularly with the high-profile Congressional angst surrounding the debt ceiling.

"There's a change in tone out there," RBS economist Michelle Girard told CNBC. "I'm more concerned about the outlook now than I was at any point since we emerged from recession. It's not near where I think we're going to double dip, but I would say to people that I'm watchful for that."

Investors are discounting a new recession next year, writes David Callaway of MarketWatch. But then you have other pundits who think these lows have made the market oversold.

"For investors, it's important to remember that the stock market is a leading indicator, which means the last two weeks of pain was not so much tied to the U.S. debt talks as to discounting of some future economic calamity, likely a recession," Callaway adds. On the flip side, that also means the market will start rebounding before the economy does.

117Comments
Aug 4, 2011 4:57PM
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Prices must drop 50% accross the board before things will get better. I refuse to pay $6 for

a subsandwich at Jersey Mikes as one example.

Aug 4, 2011 4:55PM
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The correction was due the market for the past month or so has had no legs with one worry after another effecting it. The average investor has mixed feelings and a lowered confidence with the economy.  I would  look out for continued bad news dragging the market down,  than a buying  opportunity will present itself.

 

Maybe dow 10,000

Aug 4, 2011 4:53PM
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Idiot Tea Party?  Made up Debt Crises?  Where do you live, liberal fantasy land?  Bet you don't pay taxes.  Bet you're arrogant enough to believe you deserve what someone else worked for.  How Communist of you!
Aug 4, 2011 4:52PM
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Welcome to the party boys. The party that's been going on for a year nor two now.

The middle and lower have been getting bent over for the last 2 years now. Don't feel so good does it?. And we're fixing to get it up the ol poopchute some more so get ready for some more. Fridays not even here yet.

Now lets see if the price at the pumps reflect that $85 a barrel oil since its down now $10 in about a week.

Aug 4, 2011 4:50PM
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All my life I have always had the idea that what goes around will eventually come around'

Until prices decrease or wages catch up with prices there will be more bad news to come.

Human nature has always been dont buy something high priced unless  you really need it.

and consumers have been goulged to no end. We have reached a time that millions of people

are just getting buy.

I have already sent Santa his pink slip and I know that I am not the only one.

In my opinion by year end big stores like Wal Mart will be singing the blues and I would almost bet

I am right.

Aug 4, 2011 4:50PM
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Obama and the liberal's economic policies make Jimmy Carter look like Albert Einstein.
Aug 4, 2011 4:47PM
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I got to say  if was down turn it will not be as bad. Most companies are in healthy condition or least in position to adapt quickly. they have been more careful. I say it  once it hit bottom it good time to buy. Also bad time to buy gold it is inflationary bubble. inflation across the broad have not risen high enough justify gold  increase in price.  
Aug 4, 2011 4:47PM
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Sure, this has nothing to do with the idiot Tea Party-led, made-up Debt Ceiling Crisis.  Why have the wealthy pay their fair share of Taxes when the middleclass can pay for the Financial Meltdown Republicans caused.....  Hey, after all its our fault Middleclass.  We put the idiot Republicans back in control of the House in 2010, no?  Oh I know Righties, its all Obama's fault.... of course.... Duh!
Aug 4, 2011 4:46PM
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Join the party and cheer  your  tea bag  heros now !!!! They will soon dry out !!!
Aug 4, 2011 4:37PM
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Four more years ! Four more years ! Four more years !
Aug 4, 2011 4:29PM
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Happy Birthday OBOZO from the investment community!!!!!
Aug 4, 2011 4:28PM
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Anything over 10,000 is hot air and manipulators market any way. Fun and games are over with. Hope the Tea Baggers are happy now. What till the down grade. Then we all will see the 7,000 number again. Glad I have my 401 K in a Vanguard Savings Trust. I have only lost $35.00 so far?
Aug 4, 2011 4:22PM
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The sheep have been led to the slaughter.  Our elected representatives bought  this hogwash and allowed us  to be swindled out of our defined benefit pensions for the con game that is a 401k.  Instead of sending taxes to a gov't plan, we send our 'contributions' to Wall Street where money professionals work around the clock figuring out ways to pilfer from lower middle class americans who now have 'skin' in the markets; reminiscent of 1929.....  Wall Street doesn't like policy, the markets respond with 'Booooo!' and we and our elected representatives run for cover, selling for pennies on the dollar as we try to escape....  The sharks drive us out of the water, eat the fish that we just caught, and then swim offshore and wait for the next feeding frenzy.   They know we'll be back - we have no place else to go.   You ask why there is no recovery?  HSBC nets 11.5 billion over 6 months and simultaneously announces 25,000 layoffs.     Don't give wall street what it wants, and thug rating agencies like Moody's threaten our credit rating....   when they got us into this mess with their mortgage backed securities rating scam.     And Congress is on vacation....
Aug 4, 2011 4:19PM
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Someone (Sailor 7) the problem is the government. How low can the market go is based on the optimism of the investors. Faith in the government and all its empty promises is what is now driving the stock market into the ground. Congress is owned by lobbyist and the President is a lost ball in high weeds. Economic confidence makes the market rise and lack thereof makes it fall, so where do you think the market is going.
Aug 4, 2011 4:17PM
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SELL,SELL,SELL, THIS IS JUST THE BEGINNING OF A VERY BUMPY RIDE. IN THE LAST WEEK OR SO. THE SOOTH SAYERS SAY BUY SELL STOCKS BUY SELL GOLD AND SILVER.  DO YOU GET MY POINT. THINGS SUCK. 20+ MILLION UNEMPLOYED WITH THOUSANDS TO COME. ALMOST 50 MILLION ON FOOD STAMPS. WHERE DO THESE SOOTH SAYERS GET THERE INFO BETTER YET FOLLOW THE MONEY. WHO PAYS THEM. GOLD AND SILVER WILL BE THE PLACE TO BE DURING THIS TIME. THE INDIVIDUAL INVESTOR IS GONE. THE CONSUMER IS GONE. THE JOBS ARE GONE. THE END OF AMERICA IS HERE NOW. NASA LAYING OFF 10,000, HSBC LAYING OFF13,000 WORLD WIDE. THIS IS GLOBAL WE ARE ALL CONNECTED. I HAVE TO LAUGH STILL 400,000+ UNEMPLOYMENT CLAIMS A MONTH AND WHEN IT GOES DOWN A 1000 OR SO THE SOOTH SAYS GET ALL EXCITED LIKE THAT MEANS SOMETHING. THEN MONTHS LATER WE FIND THE BOOKS WERE COOKED AND THEY REVISE THAT AMOUNT. 2ND Q GNP MAYBE 1.3 DON'T FORGET INFLATION NOW. THE SOONER YOU FACE THE FACTS THE BETTER OFF WE WILL ALL BE. DEPRESSION II IS HERE.
Aug 4, 2011 4:12PM
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How low, probably to the level of the government. The bottom!

Aug 4, 2011 4:03PM
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How low can the market go?  How greedy is wall street.  As long as they can bleed off our 401s and retirement funds they will do so.  We do not have a government worth a **** that will attempt to do anything about it.
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