There is some turmoil in the U.S. stock market. The DOW is down 270 points because of rate fears. This is the worst one-day drop since the Brexit vote earlier in the summer.
This volatility may have been due to a Federal Reserve discussion about a September rate hike.
The DOW went down 270 points around 1:30 p.m. ET. Before this, stocks had been somewhat quiet, causing investors to become nervous. The S&P 500 has gone 52 days without any major changes. Investors believe this means stock may be falling. The Nasdaq is down about 100 points and the S&P is down 40 points.
The Wall Street “fear” gauge, called VIX, has gone up by 27% to 15.97. It is still less than the jump that happened with Brexit.
Some of the most popular companies in the stock market right now are: GoPro (GPRO, Financial), Bank of America (BAC, Financial), Apple (AAPL, Financial), AT&T (T, Financial) and Ford (F, Financial). Stocks that are gaining include Kroger (KR, Financial), Metlife (MLG, Financial), TripAdvisor (TRIP, Financial), Unum (UNM, Financial) and Cigna (CI).
With the DOW down so many points, there are likely to be losses for the week and the month. Trading is very low after the comments from the Federal Reserve.
Stocks and bonds prices are dropping today. Central banks are backing away from easy-money policies that could raise the value of the dollar.
The Boston Fed President said that he is favoring a “gradual normalization” of rates. A rate hike is expected before the end of the year.
There have been many signs leading up to this decline:
The growing use of negative interest rates is a clue. A third of all global governments’ debt has a negative yield. Weak corporate politics also do not help. We have had five consecutive quarters with earnings declines.
The fallout from Brexit is piling up as well. London real estate prices have dropped and several global companies are moving out of the country. There has also been a general slowdown of the global economy. Oil prices are also down. The rate of people leaving the job market is about the same.
Everything seems to be on hold todayas investors are awaiting the jobs report from August. This can greatly influence the stock market. When there are fewer jobs, fewer people are trading stocks.
There are many factors that lead up to a decline in the stock market. The Gross Domestic Product (GDP) is a measure of the health of a nation. It is the total amount of services and goods produced within a country’s borders.
The jobs report shows the health and strength of the economy. The U.S. Bureau of Labor Statistics keeps track of the 80% of workers who are making 100% of the GDP. Another factor is price indexes. The Consumer Price Index and the Producer Price Index are measures of the price changes of goods. The Consumer Price Index (CPI) points out the changes in price for 200 specific goods and services. The Producer Price Index shows the average price of over 10,000 commodities. As far as investors are concerned, high prices will hurt their business. If the prices are higher for basic goods, then no one will have extra money for discretionary items. This could prevent firms from growing and hiring new people. Retail sales count for 70 % of GDP, so they are an indicator of the health of the economy.
The U.S. Employment report is the first piece of major economic information that we get each month. It is released on the first Friday of the month at 8:30 a.m. Eastern time. The release of this data usually leads to a large trading frenzy that could last a few minutes or a few days. The trend in the market seems to follow the job rates in that report.
The unemployment report for September says the unemployment rate is staying still at 4.9%. The number of unemployed people in the U.S. is still at 7.8 million. This is the same from the previous month. The labor force participation rate is 62.8%. The employment-population ratio is at 59.7%.
The non-farm payroll rose by 151,000 in August. This is an average monthly gain of 204,000 for the last year. Financial activities employment continued upwards in August as well.
Disclosure: I do not own any shares or any stocks mentioned in this article.
Start a free 7-day trial of Premium Membership to GuruFocus.
