NYSE Down 416 Points, but Not the End of the World, Analysts Say
The stock market suffered its worst day in five years Tuesday. Not since September 11, 2001, has the stock market gone through such an adjustment. The New York Stock Exchange lost more than 400 points, mostly based on the idea that Chinese and U.S. economies might be suffering a slowdown and concern that share prices have become inflated.
One day after setting an all-time high, Chinese stocks lost 9 percent of their value Tuesday. The Dow followed suit, immediately falling sharply until the Dow had fallen almost 550 points. It rebounded in the last hour of trading to ultimately lose slightly more than 3 percent of its value. This left the Dow lower than it’s been at any point this year.
The NYSE, in comparison, lost more than 7 percent, around 684 points, on September 12, 2001.
Every sector of the market was affected Tuesday. Riskier investments, such as small-cap and technology socks suffered major declines, but industrial companies, often seen as stabilizing forces in the marketplace, were also negatively affected. Raw material producers seemed to be hit hardest of all.
In spite of the magnitude of the drop, most analysts were un-fazed, and have been expecting a day of decline after the market-wide rally that began last October.
“This corrective consolidation phase isn’t going to be one day,” said Bob Doll, global chief investment officer of equities for BlackRock. “We don’t believe this is going to be a bear market.”
Some investors put today’s drop in a long-term perspective. “All who invest should feel grateful that we’ve had a great run for the last 12 to 18 months,” said Joel Kleinman, a Washington, D.C. attorney. “This is another day in the market.” He added that short-term ups and down of the market should not be read into too much.
“I think that the market was prepared to pull back,” said an investment strategist at The Hartford. “The constellation of issues that were worrying the market came to a head.”
Chief among those worries was a recent report that the economy may be decelerating. Economic indicators had recently shown a slow-down in growth, but Michael Strauss, from Commonfund, feels the change may have been abrupt. “It looks more and more like the economy is a slow growth economy,” he said. “Moderate economic growth is good – an abrupt stop in economic growth scares people.”
But don’t call this a correction, say some analysts. A correction is considered a 10 percent loss in a bull market. After being at an all time high for both value and trading volume, the Dow is down 4.5 percent.