Has the 2016 stock market correction turned around … or are we experiencing a brief break in a downward trend? What do the numbers indicate? What do the analysts have to say? geralt / Pixabay
A market is officially in a correction when stocks fall more than 10 percent below a recent high. The major indices have been in a correction for several weeks, but things finally improved as we reached the end of February.
However, is the stock market correction over? Officially, things have improved in two of the indices, but not enough to be confident that they will not slip back.
Dow Jones Industrial Averages:
End of 2015: 17,425.03
Feb. 26, 2016: 16,639.97 -785.06 (-4.51 percent change this year)
52 Week High: 18,351.40 (-1,711.43 which is -9.33 percent below 52 week high)
S & P 500:
End of 2015: 2,043.94
Feb. 26, 2016: 1,948.05 -95.89 (-4.69 percent change this year)
52 Week High: 2,134.72 (-186.67 which is -8.74 percent below 52 week high)
End of 2015: 5,007.41
Feb. 26, 2016: 4,590.47 -416.94 (-8.33 percent change this year)
52 Week High: 5,231.94 (-641.47 which is -12.26 percent below 52 week high)
Do Analysts Predict an Extended 2016 Stock Market Correction?
As investors can see from the above numbers, after the past two weeks of improving stock prices, only the Nasdaq is still in an official correction because it remains 12.26 percent below its 52 week high. The Dow remains close to correction levels, hovering at 9.33 percent below its 52 week high. The S&P 500 is currently the strongest of the three major indices at only 8.74 percent below its 52 week high.
Despite the rebound in equity prices, according to a Bank of America report which was released in mid-February, the odds of a U.S. recession during the next year is about 25 percent.
What Issues Could Affect a 2016 Stock Market Correction?
- Investors will be closely monitoring the price of crude oil. When it drops below $30 a barrel, the stock market tends to crash, too, especially the energy sector. As of Feb. 26, 2016, however, West Texas Intermediate crude closed at $32.78 a barrel, although that was a small decline from the day before.
- Investors will be watching for signals from the Federal Reserve about when they might raise interest rates again. The Fed is hopeful that we will see 2 percent inflation later this year, which is their goal. If the Fed is right about their projections, the stock market will turn around. If investors believe the Fed is wrong, equities will fall. However, despite some improvement in the rate of inflation, we have not reached that goal, yet:
- According to a forecast by Kiplinger at the end of January, “We expect that moderate growth and uncertainties overseas will hold the Fed to two rate hikes this year instead of four: One at its June 15 meeting, and the second likely in December.” However, on Friday, Feb. 26, the Fed said that recent signs of tightening in the economy are the equivalent of what would have happened if they had already raised interest rates three times:
- Another area that will affect the stock market is job creation and the unemployment rate. Employers added 151,000 jobs last month and unemployment dipped to 4.9 percent, even though more people re-joined the job market. In addition, hourly wages rose 0.5 percent. Many analysts believe these reports show strength in the economy.
- Consumer sentiment is another issue that analysts are watching. Recently, that indicator seems to have slipped.
- The trade gap in the U.S. has continued to widen, which is a sign that many U.S. businesses are struggling to sell their goods overseas:
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
Significant Events and Economic Reports in April
- April 1 – Employment Situation for March 2016
- April 5 – Job Openings and Labor Turnover Survey for Feb. 2016
- April 8 – America’s Young Adults at 29: Labor Market Activity, Education, and Household Composition
- April 14 – Consumer Price Index for March 2016
- April 22 – Employment Characteristics of Families Annual 2015 report
- April 28 – College Enrollment and Work Activity of High School Graduates Annual 2015 report
- April 29 – Employment Cost Index First Quarter 2016
Market prices provided by http://finance.yahoo.com
http://www.breakingnews.com/ (Feb. 2016)
Charts and statistics from: https://twitter.com/StockTwits and CNNMoney and MarketWatchEconomy
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