What is behind the recent ups and downs in the stock market? Investors nervous about global economy are retreating into safe havens. geralt / Pixabay
During the first seven weeks of 2016, many investors have experienced whiplash over concerns about both the U.S. and global economy. First they had to deal with the worst drop in stock values for any January since 2009. Then, earnings were released and investors were faced with the most dismal results since 2009. Following that, stocks continued to fall in early February until they gradually seemed to flatten out and recover for a while in mid-February.
By Feb. 19, the indices all continued to be solidly in a correction (having fallen over 10% from their recent highs), although they all looked a little better than they did the week before. Both analysts and investors are concerned over a number of issues that could have a major impact on the global economy and, consequently, the stock market.
First, check out exactly where the market stood as of the close of trading on Feb. 19, 2016. As you can see below, all three of the indices were more than 10 percent below their most recent highs.
Dow Jones Industrial Averages on 2/19/16:
End of 2015: 17,425.03
Feb. 19, 2016: 16,391.99 -1033.04 (-5.92 percent change this year)
52 Week High: 18,351.40 (currently down -1,959.41 points or -10.68 percent below 52 week high)
S & P 500 on 2/19/16:
End of 2015: 2,043.94
Feb. 19, 2016: 1,917.78 -126.16 (-6.17 percent change this year)
52 Week High: 2,134.72 (currently down -216.94 points or -10.62 percent below 52 week high)
NASDAQ on 2/19/16:
End of 2015: 5,007.41
Feb. 19, 2016: 4,504.43 -502.98 (-10.04 percent change this year)
52 Week High: 5,231.94 (currently down -727.51 points or -13.91 percent below 52 week high)
What Issues are Keeping Investors on Edge?
- Saudi Arabia and other oil producing countries have made it clear that they do not plan to cut their oil production. However, they are having discussions about whether or not they can all agree to freeze their production at current levels. Their goal is to keep oil prices from falling further. One problem is that Iran announced over the weekend that they plan to increase their oil production. On Friday, Feb. 19, crude oil closed at $29.64 a barrel. Some worry that it could drop even lower if production is not cut or at least frozen.
- Weakness in emerging markets, like China, could affect a number of international corporations and American exports. If the Chinese, for example, continue to use less oil, the oil glut could get worse, causing oil prices to drop further.
- Well-respected financial leaders have been expressing their concerns about the global economy. This weekend, Bob Michele, the global CIO and head of global fixed income at JPMorgan Asset Management told CNBC, “I think there is a global growth slowdown underway.” In an article titled “Fear has Replaced Greed in Markets,” Michele was also quoted as saying that he agreed with the hesitation the Fed expressed about moving forward with more interest rate hikes. In fact, he added, “When I read the Fed minutes, I see a central bank that is out of sync with the other central banks of the world and is second-guessing itself.”
- Some investors are concerned about scary charts that have been released, like this one:
- On the other hand, some economists continue to express the opposite viewpoint, which only contributes to confusion and uncertainty for investors. For example, in their research note on Friday, Feb. 19, Capital Economics said it expects the stock market to “make further headway this year.” They believe that China’s economy will improve.
- As evidence of investor caution, many of them have been moving assets into safe havens like 10-year Treasuries and gold. Both have gone up in price sharply the last couple of months.
Here’s a list of the Best and Worst Performing Stocks Since the Beginning of the Year:
Significant Dates, Events and Economic Reports in March
- March 3 – Productivity and Costs for 4th 2015
- March 4 – Employment Situation for Feb. 2016
- March 15 – Producer Price Index for Feb. 2016
- March 16 – Consumer Price Index for Feb. 2016
- March 17 – Job Openings and Labor Turnover for Jan. 2016
- March 22 – Employment Situation of Veterans Annual Report for 2015
Market prices provided by http://finance.yahoo.com
http://www.breakingnews.com/ (Jan. and Feb. 2016)
Charts and statistics from: https://twitter.com/StockTwits
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