Dow Plunges More Than 300 Points

zippyjuan · 11-01-2007, 02:07 PM

Might be a good time to buy- unless you agree that the economy is headed for a big slowdown. Investors moving from stocks to securities like Treasuries will drive up interest rates for mortgages further slowing the housing market- a key component of recent economic growth. On the brighter side, the lower value of the dollar has been helping drive export sales while decreasing imports- improving the trade defecit and growth in the foreign trade sector.

October is usually a slow to down month anyways as investors sell gainers to lock in profits and losers to offset them on taxes for their year end figures.

http://my.earthlink.net/article/top?...1101-935467824

Quote:

Dow Plunges More Than 300 Points
By JOE BEL BRUNO (AP Business Writer)
From Associated Press
November 01, 2007 3:47 PM EDT
NEW YORK - Wall Street plunged Thursday, pulling the Dow Jones industrial average more than 330 points, as investors found themselves confronted by two uncomfortable prospects: an end to interest rate cuts and a slowing economy.

Mindful of a warning from the Federal Reserve Wednesday about inflation, the market nervously watched the price of oil, which passed $96 a barrel overnight for the first time before dipping on profit-taking. The Fed, which cut interest rates a quarter point, said in a statement that inflation remained a concern, and oil's ascent to another record raised the possibility not only that the Fed might stop cutting rates, but that it might even consider raising them if inflation accelerates.

Meanwhile, Wall Street had to contend with concerns about a slowing economy. A report from the Commerce Department indicated consumers scaled back their spending in September as worries mounted about a worsening housing market and further credit market turmoil. And a trade group reported that manufacturing in the U.S. grew in October at the weakest pace since March.

The combination of factors led investors to pull back sharply from Wednesday's rally, in which the Dow climbed 137 points after the Fed said the economy had weathered the summer's credit crisis.

"Wall Street is in love with the idea of a rate cut, and realized that the Fed said inflation is still a concern - that lowered the chances of a cut in December," said Ryan Detrick, a senior technical strategist with Schaeffer's Investment Research. "We're now feeling the pain now that investors have slept on it, and figured out what they said."

Christopher Cordaro, chief investment officer at RegentAtlantic Capital, said Wall Street remains anxious about the possibility of recession. He also believes the market is devoid of enough positive news "to have any type of sustained rally."

Investors were unswayed when the Fed pumped $41 billion into the U.S. financial system, one of its largest cash infusions since the credit crisis began in the summer. This increases the amount of money banks have to lend, and helps improve liquidity. In the past, such an action helped soothe the market, but that was not the case Thursday.

With the market growing pessimistic about the economy, the Labor Department's report on October jobs creation, scheduled to be released Friday morning, will be taking on even more importance than it usually has.

In the last half-hour of trading, the Dow fell 337.75, or 2.42 percent, to 13,592.26. The blue chip index was at its lows of the session.

The Standard & Poor's 500 index was off 36.86, or 2.38 percent, at 1,512.12.52, while the Nasdaq composite index dropped 55.39, or 1.94 percent, to 2,803.73.

Big late-session moves became common on Wall Street during the summer. Investors remain hopeful that a down market will turn around, but tend to launch a late afternoon selloff if that doesn't happen.

"I'd be surprised if we don't close on the lows of the day because of the type of panic you're seeing right now," said Chris Johnson, president of Johnson Research Group. "We've been getting all these mixed signals, and this is just a confluence of bad news between the Fed, the financials, and this mixed earnings season."

Financial stocks fell after Citigroup Inc. and Bank of America Corp., the two biggest U.S. banks, were downgraded by CIBC World Markets on worries about the credit markets.

Investors pulling money out of stocks turned to the safe haven of the Treasury market. The yield on the 10-year Treasury note fell to 4.34 percent from 4.47 percent late Wednesday.

Crude prices vaulted above $96 per barrel in overnight trading. A barrel of light sweet crude fell $1.13 to $93.40 on the New York Mercantile Exchange.

The Commerce Department's report that consumer spending rose by 0.3 percent in September, slightly lower than the 0.4 percent increase that analysts expected, raised concerns about a slowing economy.

In addition, the performance of the manufacturing sector in October suggested that ongoing troubles in the housing and credit markets have seeped into the industrial sector. The Institute for Supply Management, a Tempe, Ariz.-based trade group, reported its manufacturing index registered 50.9, down from 52.0 in September and below expectations for 51.8. A reading above 50 indicates growth; below that spells contraction.

Also Thursday, the Labor Department said the number of people filing for unemployment benefits declined by a larger-than-expected 6,000 last week to total 327,000.

Wall Street was also troubled by the day's corporate news. Exxon Mobil Corp., the world's largest publicly traded oil company, reported third-quarter profit fell 10 percent because of lower refining and chemical margins. Shares of the Dow component dropped $2.43, or 2.6 percent to $89.56.

Bank of America, the No. 2 U.S. bank, dropped $2.28, or 4.7 percent, to $46. Citi, the nation's largest financial institution, dropped $2.82, or 6.7 percent to $38.54 - its lowest level in four years.

Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange, where volume came to 970.8 million shares.

The Russell 2000 index of smaller companies was down 24.63, or 3 percent, at 803.39.

The plunge in U.S. stocks caused European bourses to tumble. In afternoon trading, Britain's FTSE 100 was down 2.17 percent, Germany's DAX index fell 1.77 percent, and France's CAC-40 dropped 2.09 percent. Japan's Nikkei stock average, which closed before U.S. markets opened, rose 0.79 percent.

JackHammer · 11-01-2007, 04:48 PM

I got a question: if the feds just cut rates why would anyone want to invest in treasuries. The current rates are less than 4%.

zippyjuan · 11-01-2007, 05:13 PM

Safety. It is a guaranteed return. The only real risk is inflation growing at a faster rate meaning you are losing in real terms. They are more atractive if you think stocks will go up more slowly or even decline.

Or if you think interest rates will decline. When you buy a bond, you buy it at a discount- it is full value when it matures- say paying $950 for one that will be worth $1000 at maturity- a net yield of 5.3% if my math is any good here. If interest rates fall, then the price of buying a bond is higher (say $975 now or a 2.6% yield)). Your original bond is worth more so you can sell it for more so instead of waiting until maturity, you can gain the extra $25 now meaning you reaped your return over a shorter time period (say five years instead of holding it for 30 years). This greatly increases your annual rate of return.

Prngr44 · 11-02-2007, 08:44 AM

My gut tells me the worst is yet to come.

I've always focused on consumer confidence as the biggy lately. Feds cut rates, "Yay, buy buy buy." Oil hits a new record high and it's buyers remorse. One day later and back to worrying about the same old things.

This holiday retail season will be VERY telling about the direction of the market.

cruelpupet · 11-06-2007, 07:43 AM

The worst is yet to come, but with the dollar falling the way it is, might as well invest it anyway.

Daedalus · 11-06-2007, 08:53 AM

Well, yeah. In gold and foreign currencies.

zippyjuan · 11-06-2007, 12:33 PM

Gold has had a pretty good apreciation. If you are buying physical gold, there is a pretty good margin on both the buying and selling side- you need about a 40% gain just to break even. My dad talked me into buying gold the last time it went up a lot- I still cannot get what I paid for it that was some 20 years ago (January 1980 it hit $850/ ounce and I did not pay much less than $800) . He is still trying to talk me into buying more but I was too put off after the last time. After inflation, I am losing more. At least it was only a couple ounces. Not sure what transaction costs for currency might be. Much lower than for gold.

Daedalus · 11-06-2007, 01:37 PM

Quote:

Originally Posted by zippyjuan

Gold has had a pretty good apreciation. If you are buying physical gold, there is a pretty good margin on both the buying and selling side- you need about a 40% gain just to break even. My dad talked me into buying gold the last time it went up a lot- I still cannot get what I paid for it that was some 20 years ago (January 1980 it hit $850/ ounce and I did not pay much less than $800) . He is still trying to talk me into buying more but I was too put off after the last time. After inflation, I am losing more. At least it was only a couple ounces. Not sure what transaction costs for currency might be. Much lower than for gold.

True, true. Guess I'm like Smeagle with my preciouses. See them glitter. See them glow. You have to admit having physical gold coins in hand is definitely out of the ordinary.
The transaction costs aren't quite that high. I bought some newly-minted loonies when the spot price was about $295 back in '99 or '00. I paid $320/oz, which included spread, fees and insured shipping. I can sell it back to the same place for about the same spread, but in a strong market you can always sell locally close to spot. Your father and my father were probably at a lot of the same meets and conventions back in the 70s and 80s. But I'm not a gold bug by any means. As soon as conditions stop favoring the barbaric relic I'll get rid of them. Well, maybe I'll keep one.

zippyjuan · 11-06-2007, 06:08 PM

I'll sell you a Krugerrand for a mere $900. I think I learned more about buying what is hot while it is probably nearing a peak (which I think gold may be getting to but have no way of knowing of course) than about buying metals. The margins that you pay on buying and selling also scare me away from the actual metal but if you are interested there are other ways to invest such as stocks in gold producing companies.

Daedalus · 11-06-2007, 08:14 PM

$900? Is it a desireable year? I can have one shipped to my door for $860 right now, with gold at $834 spot.

Moot point since I'm not looking to add to my position. Gold below $300/oz was quite compelling. Gold at a 37 year high isn't. I do believe the gold market has legs, but I too am wary of buying into bubbles.

Ironic you mentioned gold stocks. Your father made you buy gold. My father bought some Aussie gold stock with my IRA when I was a teenager. That company went bankrupt. At least gold will never go to zero.

11-01-2007, 04:48 PM	#2
JackHammer Commander Join Date: Jun 2000 Location: The Toilet Capital of America Posts: 1,328	I got a question: if the feds just cut rates why would anyone want to invest in treasuries. The current rates are less than 4%. __________________ "I'm very sorry for your loss. Your mother was a terribly attractive woman." -Royal Tenebaum "Oh yeah. Oh yeah. I would do everything to her, I don't care what she looks like. I would wreck that chick." -Brian from the Family Guy after Peter asked him whether he would have sex with Lois.

11-02-2007, 08:44 AM	#4
Prngr44 Rear Admiral Lower Half Join Date: Feb 2003 Location: St. Louis Posts: 2,620	My gut tells me the worst is yet to come. I've always focused on consumer confidence as the biggy lately. Feds cut rates, "Yay, buy buy buy." Oil hits a new record high and it's buyers remorse. One day later and back to worrying about the same old things. This holiday retail season will be VERY telling about the direction of the market. __________________ http://otthouse.blogspot.com

11-06-2007, 07:43 AM	#5
cruelpupet Admiral Join Date: Jan 2001 Location: NYC Posts: 6,302	The worst is yet to come, but with the dollar falling the way it is, might as well invest it anyway. __________________ Am I alone here? Is that it? Am I the only one who sees. Maybe we can learn to be just like him. Wear a little uniform. Yes, sir. No, sir. Thank you, sir.

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11-01-2007, 05:13 PM	#3
zippyjuan Picture of the Day Guru Join Date: Oct 2002 Location: Sunny San Diego Posts: 8,756	Safety. It is a guaranteed return. The only real risk is inflation growing at a faster rate meaning you are losing in real terms. They are more atractive if you think stocks will go up more slowly or even decline. Or if you think interest rates will decline. When you buy a bond, you buy it at a discount- it is full value when it matures- say paying $950 for one that will be worth $1000 at maturity- a net yield of 5.3% if my math is any good here. If interest rates fall, then the price of buying a bond is higher (say $975 now or a 2.6% yield)). Your original bond is worth more so you can sell it for more so instead of waiting until maturity, you can gain the extra $25 now meaning you reaped your return over a shorter time period (say five years instead of holding it for 30 years). This greatly increases your annual rate of return.

11-06-2007, 08:53 AM	#6
Daedalus Lieutenant Commander Join Date: Dec 2002 Posts: 824	Well, yeah. In gold and foreign currencies.

11-06-2007, 12:33 PM	#7
zippyjuan Picture of the Day Guru Join Date: Oct 2002 Location: Sunny San Diego Posts: 8,756	Gold has had a pretty good apreciation. If you are buying physical gold, there is a pretty good margin on both the buying and selling side- you need about a 40% gain just to break even. My dad talked me into buying gold the last time it went up a lot- I still cannot get what I paid for it that was some 20 years ago (January 1980 it hit $850/ ounce and I did not pay much less than $800) . He is still trying to talk me into buying more but I was too put off after the last time. After inflation, I am losing more. At least it was only a couple ounces. Not sure what transaction costs for currency might be. Much lower than for gold.

11-06-2007, 06:08 PM	#9
zippyjuan Picture of the Day Guru Join Date: Oct 2002 Location: Sunny San Diego Posts: 8,756	I'll sell you a Krugerrand for a mere $900. I think I learned more about buying what is hot while it is probably nearing a peak (which I think gold may be getting to but have no way of knowing of course) than about buying metals. The margins that you pay on buying and selling also scare me away from the actual metal but if you are interested there are other ways to invest such as stocks in gold producing companies.

11-06-2007, 08:14 PM	#10
Daedalus Lieutenant Commander Join Date: Dec 2002 Posts: 824	$900? Is it a desireable year? I can have one shipped to my door for $860 right now, with gold at $834 spot. Moot point since I'm not looking to add to my position. Gold below $300/oz was quite compelling. Gold at a 37 year high isn't. I do believe the gold market has legs, but I too am wary of buying into bubbles. Ironic you mentioned gold stocks. Your father made you buy gold. My father bought some Aussie gold stock with my IRA when I was a teenager. That company went bankrupt. At least gold will never go to zero.

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