What is going on with the stock market?

Question

Less than 5% unemployement and a steadily growing economy and no signs of inflation why is it going down.

Answer 1

Stocks Tumble on Subprime Worries.

Too many foreclosures on all those Adjustable mortgages they passed out over the last few years.

Answer 2

An easy answer is the subprime market meltdown but its more than that. Some would argue that since supbrime is such a small % of the overall lending market that it shouldn't be that big of a deal...(who really cares if New Century goes out of business) but regardless what you're going to see over the next few months is a tightening of credit across the board by all major lenders. You're already seeing that with CountryWide stating they are no longer doing any 0% financing deals. In addition because all these subprime mortgages have been bundled up and sold in the secondary market we don't really know where the financial impact will be as these loans continue to default. My guess is we'll see some major institutions suprise everyone with some big losses....also I'm sure some hedge funds are vulnerable which if I'm right may lead to a liquidity problem in the private markets. Regardless of who the losers will be the fact is that with credit harder to obtain housing prices will deteriorate further and the consumers who have kept this market rally going over the past few years will start tightening their wallets resulting at best a slow down in the economy but more likely a recession. The only savior would be if the Fed stepped in and lowered rates but the Fed will only do that if they are certain that inflation is under control and have made it very clear that they will err on the side of caution and keep rates steady or even raise rates if there is any hint of inflation getting out of control.

Answer 3

There are several factors at work here, I think. People are finally discovering that it is easier to walk away from the overpriced houses that they bought several years ago when everyone thought that house prices would continue increasing at 20% annual rate forever. And of course people have been spending more than they have been making for a couple of years. The Bush administration has every indication of becoming another Nixon administration. If there is a bottom to the value of the dollar, it certainly has not materialized yet. Medical costs are on the verge of bankrupting everyone but the drug companies and doctors. There is every indication that the price of oil might take off again and not stop until it hits $80 a barrel. People that used to work at Ford and GM are having a difficult time finding employment at any place other than McDonalds and Walmart.

Last but not least, investors are thinking that it might be a good time to sell.

Answer 4

The unemployment figures are skewed and do not represent reality for many Americans. That number only shows the number of people actively drawing unemployment and it does not show the thousands that lost good jobs and now work for 1/2 what they used to make.

Foreclosures and bankruptcies are on the rise everywhere.

And "no signs of inflation" are you high? The cost of EVERYTHING has gone up in the past year, except houses. Milk, bread, gas, electric, insurance, clothes, diapers EVERYTHING.

But hey, why pay attention to reality when you can believe bs government statistics?

Answer 5

This is happening primarily because even though the US economy is doing well there is greater opportunity for larger returns in other markets like China, India and even Japan these days. Therefore investors are moving their money out of the US and into these markets. Growth prospects for US companies focused on US industrial and commercial activities are not as good as growth prospects abroad, primarily in emerging markets. China is growing at 10% per year and has been doing so for a decade now. India is growing at 8% per year and has been doing so for 3 years now. The US is growing at less than 3% per year. Where would you rather invest?

Also, because of the depreciation of the US dollar relative to most currencies, foreigners are not willing to invest in the US because after foreign currency translation the situation is even worse. Blame it all on George Bush's policies!!!!

Answer 6

We here in Michigan have over 9% unemployment and the economy is frightening declining
there are more house foreclosures than ever in Michigan history

Answer 7

your buying wrong stocks, try utilities CNP and RRI for two RRI has went up 2 dollars on a a use to be 15 dollar stock in just the last couple of weeks

Answer 8

THE CHINA STOCK MARKET COLAPSE HAS CAUSED INVERSTORS TO WORRY

Answer 9

analysts are the problem.