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All eyes on Dow after 513-point drop
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ASSOCIATED PRESS
Traders show their frustration as they work on the floor of the New York Stock Exchange on Thursday. The Dow dropped 4.3 percent to close at 11383.68.
By Karl Henkel
YOUNGSTOWN
Debt-ceiling deal? Compromise.
Domestic spending? Cut.
Stock market? Crashed.
Despite avoiding what many called “economic Armageddon” by avoiding default earlier this week, the stock market plunged 513 points Thursday — its worst single day since Dec. 1, 2008, and analysts said there’s a possibility of another free fall today.
“People tend to be sheep,” said John Reese, president of Reese Financial Services in Boardman.
“People buy in greed and sell in fear. That’s the reason why Las Vegas casinos have beautiful marble floors and posh carpeting,” he said.
Thursday’s fall of the Dow Jones Industrial Average was a result of weak global economies, said Anthony Stocks, former economics chairman at Youngstown State University.
“We’ve got problems all over the world; in Europe and even in Asia, it’s starting to get weak,” Stocks said. “Because of the global marketplace, fear spread very quickly from one country to another.”
The plummet came just a day after it snapped an eight-day losing streak during which it lost more than 700 points, driven mostly by independent investors who feared big stock-market plunges if the U.S. defaulted on its financial obligations. The Dow now has fallen more than 1,300 points, or 10.5 percent, since July 21.
But unlike last week, when financial experts pointed to individual investors as the reason for the smaller-yet-chunky daily market drops, the 512-point drop signaled the impact of bigger market players.
“The Dow is driven by two huge factions,” Reese said. “It’s the individual investors and the big institutional dollars, which aren’t run by humans — they’re run by machines.
“If the Dow does this, the machine does that.”
The sell-off was broad. All 10 industry groups in the Standard & Poor’s 500 index fell. Energy companies lost almost 7 percent, materials companies were down 6.6 percent and industrial companies lost more than 5 percent.
But why now?
The recent GDP report showed the economy is growing at a slower-than-expected rate.
Consumers spent less in June than they did in May, the first slip since September 2009.
Unemployment remains at 9.2 percent.
All three and the stock plunge have some leaders, including Ohio Gov. John Kasich, worried.
“I’m concerned about it,” Kasich said Thursday. “What’s been happening here over the last couple of days borders on alarming. ... The market is reflecting a lack of confidence [and businesses] not being willing to invest because of uncertainty, not bringing the workers on. At the same time ... consumers have gotten very nervous when they watch developments in Washington.”
Kasich said a contributing factor is that businesses aren’t investing in expansions and consumers aren’t spending.
“They’re sitting on cash because they don’t feel really comfortable investing,” he said. “And the problem is until they invest, which includes hiring workers, the cycle doesn’t get moving.”
Fears over another economic collapse and ensuing double-dip recession are not out of the question.
“That could happen, but eventually markets do stabilize,” said Stocks, who said continuing fear could play a factor in the coming days. “This market will move in the same direction, but who knows how far is down?”
On Dec. 2, 2008, the day after the Dow lost 677 points, it regained 270.
Columbus Bureau Chief Marc Kovac and Associated Press contributed to this report.
Comments
Stock Market drop.........I checked my money, & it's still under the pillow.I 've learned my lesson with "stocks"
....interesting
Kasich spent half a decade as managing director of Lehman Brothers ---The Collapse---which in fact a contributor and trigger of our recession; One just wonders how to place value on his word regarding his "input" and "ignorance" of the stock market?!
Financial stocks were again among the worst hit stocks in Asia, with Nomura Holdings Inc. down 5.4%, HSBC Holdings PLC skidding 4.3%, and Macquarie Group Ltd. dropping 7.2%. http://bit.ly/n55Ip0
With a wink and a nod to James Carville -"It's the DEBT, stupid!" Until the debt is seriously reduced, it's going to get harder.
Just say thank you TEA look at all the money you guys saved us
Kasich's spin about "uncertainty in Washington" and a "lack of confidence" is just goofy. Republicans have spent the last three years saying no to everything and compromising on nothing because they lost the 2008 Presidential election. Now we're reaping the effects of that non-governance. I'll take my hope and change over "NO!" any day.
Some other factors/priorities to consider...the US spends more on "defense" than the rest of the world combined.
American entitlement programs eat up about as much as our military orgy. (How many entitlement dollars are we squandering?)
Military and entitlements...about 80% of (y)our federal tax receipts?
Our health (lack of) care system---from our unique insurance ripoff, to big pig pharma's complex moneyed army, to many doctors who participate in the gluttony...---um, hello to the obvious again and a large piece of a "free" enterprise system run amok. A muck among us.
The top 1%...hey, who wouldn't want to be CEO and/or a top shareholder of XYZ Corp?
Trickle down? My butt. Amass more and more for the richest in our country at an accelerating rate? As a (in)famous Dumbocrat said: "Everyone is entitled to his own opinion but not his own facts."
Our massive education expenditures...what are we learning/making/thinking?
We're lucky(?), for now, that some things---food, gas, water....---are relatively cheap in the US.
What are our priorities? Cutting funds to those who need it most...they don't vote or contribute to our never-ending political prostitution. The poor, who are now poorer and growing fast(er) in numbers, are an easy target.
Meritocracy? Mediocracy? Where are we and where are we headed?
Barry's too busy to worry about such trifles. Curious tho: any Vindy reader attend his birthday bash last night? http://www.politico.com/news/stories/...
It case you haven't noticed the economy is in a down turn since the teabagger/republicans took over the house. Thousands of FAA workers have been laid off and billions of dollars in construction projects have been put on hold putting thousands more construction workers on unemployment.
rupert murdoch, the most powerful scumbag in the world.
Start of Dumya's 2nd term: Federal debt $5.7 trillion (almost all of the 5.7 created during Dumya's 1st term?)
End of Dumya's 2nd term/presidency: Federal debt $10.7 trillion
Obumma...now we're heading toward $15 trillion...with the continuation of Boosh policies (This "new Obama" debt isn't new at all. It's (almost?) entirely made up of transferring trillions in bad private debt---particularly from the mortgage mess---to the public side.)
you cannot fight two wars,assist in the conflict in libya, keep extending unemployment benefits and paying nonhandicapped welfare losers and have the economy be "just fine ". nancy pelosi, thank you very much for making me poor.