What the heck is going on with the stock markets? why?

Question

I dont understand is it getting better or worse?

Do you think consumers are going to start really buckeling down their spending now?

Answer 1

Dear Thomas K,
..............................Market Update
5:02 pm : After the Dow posted its second-biggest drop in nearly four years on Tuesday, a growing sense that yesterday's broad-based downturn was an overreaction eventually prompted some afternoon short covering and helped investors get over an underlying pessimistic hump Wednesday.

Technical breakdowns on all major averages, as evidenced by the Dow slipping below the 12,000 mark intraday for the first time since November 6, 2006, exacerbated intraday declines before things finally turned around.

Today's whipsaw trading activity was also attributed to this Friday's quarterly options expiration. Also known as "quadruple witching," the simultaneous expiration of index options, stock options, index futures, and single stock futures typically adds to market volatility... and today (Wednesday) was no exception.

With concerns still looming about a possible liquidity crunch tied to an unwinding of the carry trade, further deterioration in the yen following a narrower than expected current account deficit helped to alleviate such worries. However, the bigger issue on investors' minds again was whether potential defaults by subprime borrowers will spill over into the broader economy -- a concern I still believe is OVERBLOWN.

With the market closely eyeing today's Q1 report from Lehman Brothers (LEH 71.59 -0.41) to provide some clarity on the health of the troubling subprime mortgage market, management following up its record report by saying the sector will "continue to face headwinds in the near term" pushed the stock down as much as 5.5%.

That exacerbated the mortgage delinquency news that rattled stocks Tuesday and left investors questioning whether the Financial sector's earnings potential will play out as expected.

Yes, the smarter consumers will buckle down; while the less than smart crowd won't have a choice with no savings AND/OR home to live in much less sell !!!

Answer 2

At least you're admitting you don't understand why the stock market is acting the way it is. That shows some intelligence right there!

I find this situation somewhat perplexing myself. From a strictly "looking at the stores" perspective, it seems to me like people have less disposable income than they have had in the past (unless, of course, if you're talking about restaurant spending. No one seems too willing to give that up completely). I think some of this is real, some imagined. People who had ARMs have seen their interest rates go up, so those people have a definite reduction of their spending power. However, some homeowners have seen the value of their houses go down, and it freaks them out enough to think that they've somehow "lost money" (only if you sell the house, folks!).

Anyway, if you're a long term investor, these fluctuations shouldn't freak you out too much. Instead, look for good companies that are getting unnecessarily battered with the rest of the market. Find some good stuff on "sale"!

Answer 3

Anticipation of a Romney win in November. The stock market bets on the future.

Answer 4

There will probably be about a 10% correction in prices. Look at it as a buying opportunity if you're willing to hang on for the long term. After all, no one complains when Macy's has a 10% off sale, do they?

Answer 5

Someone will explain it better but it has to do with the US housing market crash. Check out: http://www.lifeaftertheoilcrash.net/Archives2007/BonnerMarketCrisis.html

Answer 6

Don't know, don't care.

It'll be all but irrelavent in 15 years.