Posted on 02/27/2007 12:03:41 PM PST by cgk
Edited on 02/27/2007 3:25:19 PM PST by Admin Moderator. [history]
The Dow Jones industrial average is down more than 500 points with about an hour of trading left today. The Nasdaq Composite is off more than 100.
A 9 percent slide in Chinese stocks, which came a day after investors sent Shanghai's benchmark index to a record high close, set the tone for U.S. trading.
Investors' confidence was knocked down further by data showing that the economy may be decelerating more than anticipated. A Commerce Department report that orders for durable goods in January dropped by the largest amount in three months exacerbated jitters about the direction of the U.S. economy, which were raised a day earlier when former Federal Reserve Chairman Alan Greenspan said the United States may be headed for a recession.
"It looks more and more like the economy is a slow growth economy," said Michael Strauss, chief economist at Commonfund. "Moderate economic growth is good — an abrupt stop in economic growth scares people."
The market had been expecting the government on Wednesday to revise its estimate of fourth-quarter GDP growth down to an annual rate of about 2.3 percent from an initial forecast of 3.5 percent, and grew increasingly nervous on Tuesday that the figure could come in even lower.
The housing market, which the Street had been hoping had bottomed out, also looked far from recovery after a Standard & Poor's index indicated that single-family home prices across the nation were flat in December. A later report from the National Association of Realtors said existing home sales climbed in January by the largest amount in two years, but the data didn't erase housing-related concerns, as median home prices fell for a sixth straight month.
A suicide bomber attack on the main U.S. military base in Afghanistan where Vice President Dick Cheney was visiting also rattled the market.
China's stock market plummeted Tuesday from record highs as investors took profits when concerns arose that the Chinese government may try to temper its ballooning economy by raising interest rates again or reducing more of the money available for lending.
"Corrections usually happen because of a catalyst, and this may be it," said Ed Peters, chief investment officer at PanAgora Asset Management. "The move in China was a surprise, and when a major market has a shock it ripples through the rest of the market. With all the trade that goes on with China, there tends to be a knee-jerk reaction with that kind of drop."
The Shanghai Composite Index tumbled 8.8 percent to close at 2,771.79, its biggest decline since it fell 8.9 percent on Feb. 18, 1997. Since Chinese share prices doubled last year as investors poured money into the market after the completion of shareholding reforms, trading in Shanghai has been very volatile.
Hong Kong's benchmark Hang Seng Index dropped 1.8 percent, and Malaysia's Kuala Lumpur Composite Index fell 2.8 percent. Japan's Nikkei stock average fell a more moderate 0.52 percent, but European markets were rattled — Britain's FTSE 100 lost 2.31 percent, Germany's DAX index dropped 2.96 percent, and France's CAC-40 fell 3.02 percent.
Bond prices rose as investors bought into the safe-haven Treasury market, pushing the yield on the benchmark 10-year Treasury note down to 4.55 percent, its lowest level so far this year, from 4.63 percent late Monday. The bond buying was sparked primarily by the durable goods orders, which the Commerce Department said fell 7.8 percent, much more than what the market expected.
The durable goods drop raised the chance of the Federal Reserve easing interest rates later in the year — a possibility that makes the bond market an attractive place to be right now.
The hope for slowing inflation could be dashed, though, if energy costs keep rising. Oil prices initially fell Tuesday on worries that Chinese demand could be dampened should its economy slow down, but later rose on escalating tensions in the Middle East. Crude rose 4 cents to $61.43 a barrel on the New York Mercantile Exchange.
The dollar slipped against other major currencies, while gold also fell.
The Dow has been climbing at a steady rate since last summer, but over the past few trading sessions, stocks have pulled back on the worry that the market is due for a correction. Many analysts have noted that the Dow hasn't seen a 2 percent decline in more than 120 sessions.
Data indicating a slower economy had recently been giving stocks a boost on the hopes that the Fed will lower interest rates, which could reinvigorate consumer spending and the struggling housing market. But the market may fall further before that happens, analysts said.
"If in a week or two, the psychology in the U.S. market turns to the realization that we're in a modest growth economy of 2 to 3 percent growth, that will help temper inflation pressures going forward. If that perception evolves, there's an increase in the likelihood that the Fed will be lowering rates rather than raising rates. Structurally, it's a development that should be good for the equity market, but it might be an event that unfolds after prices are lower," Strauss said.
Declining issues outnumbered advancers by about 7 to 1 on the New York Stock Exchange, where volume came to 1.39 billion shares.
No sector was left unscathed by Tuesday's sell-off, and all of the 30 Dow components were lower in early afternoon trading.
NYSE-listed shares of Chinese companies plunged. China Mobile Ltd. tumbled $3.39, or 6.9 percent, to $45.89. Mindray Medical International Ltd. dropped $3.69, or 12.85 percent, to $25.02. China Eastern Airlines Corp. fell $4.435, or 13.14 percent, to $29.315.
On the Nasdaq, Internet company Baidu.com Inc. fell $4.44, or 4 percent, to $107.27. Shanda Interactive Entertainment Ltd., which develops online games, fell $1.42, or 5.7 percent, to $23.50.
___
On the Net:
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
China admits that they caused the current correction, as speculation in China's markets had become ludicrous. Chinese authorities let it slip that they were going to implement a crackdown if the Market didn't correct itself.
Once that "Rumor" got out, the selling began.
Nope. The old guy said it.
http://www.nctimes.com/articles/2007/02/28/business/news/12_46_062_27_07.txt
Great. He's gone, but he is still opening his mouth and causing the same problems he did when he was there. Can't he take his stupid liberal wife and go live in the Soviet Union with all their lefty friends?
Remember "Mayothedung",,kill the chickin' to scare the
monkey...
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Yep,,,Mayo on dat chickin'sammage ??...LOL;0)
bttt
Now that M3 is no longer reported they can print money at will.
And now they have an excuse to inflate, and they'd better do it fast while consumer and investor sentiment is still high.
Dollar be d@mned.
BUMP
He retired. It is the new guy now.
Then he should be take down to the basement and duct-taped!
Uh, yes. I guess you haven't seen the news in the last two days, where Greenspan was blowing smoke and made the comments? He is no different than Bill Clinton or Jimmy Carter -- they all have difficulty controlling their loose mouths.
The fact that one man (Greenspan)can make a comment, and it causes these kind of problems all around the world, tells me all I need to know about the state of the world today, and it isn't looking good.
Your right. I try to avoid watching any MSM news. If I don't pick it up on the Internet, I usually miss it. My stomach can only take so much, and I don't waste any of that "much" on the liberal media.
I blame Dr. Heidi Cullen and her "Sky Is Falling" programs on The Weather Channel.
Thanks for the link. I wasn't aware of Greenspan's comments. I agree, though, that what he says now would be a good gauge to use; nothing to hinder him now. I was sorry when he went because I thought he did a good job and not only has a longer track record, but a pretty good one, IMHO.
You are lightyears ahead of me with investment knowledge. I'm not sure what your last paragraph means, unless you're putting things into more conservative (safe) areas with the assumption that a recession is on the horizon.
I probably have at least three or four decades on you so my time horizon is very different but if there is a recession the economy will slow down, companies will earn less and their stock price will drop. Conversely the Fed will (in theory) drop interest rates and thus bonds with higher yields will increase in value. Thus I have been slowly shifting from stocks to bonds trying to buy varied redemption dates (called "laddering").
The one exception to the above are "junk bonds" which I think these days are called "high yield". These are usually bonds from companies with less than stellar credit ratings; historically in a bad recession their bonds, and especially junk bond funds, can tank faster than you can blink.
If you're young, even in your 40's (young to me), I probably wouldn't be too concerned about this, you're in it for the long term and over the long term stocks will give you a better return than bonds. Plus it's impossible for most people to time the market; this cycle I have seriously missed the top of this market as I usually do.
And an addendum to my tag line; nothing I say should be construed as any kind of competent investment advise.
So far as you say.
One of my all-time favorite movies!
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.