Markets "In a Nutshell" for February 5, 2018Feb 05, 2018
Investment Week at a Glance
Tough week for stocks. The Dow Jones Industrial average was down 4.1%, the S&P 500 dropped 3.8%, and the New York Stock Exchange Composite (2,000 stocks) fell by 4.1%. The “average investor’s index” (Value Line index) was down 4.2%. Foreign stocks (DJ Global ex U.S.) tanked 3.2% and bond prices (Barclays Aggregate Bond index) dropped in value last week as the 10 year Treasury yield ended at 2.85%. (Data sources: Barron’s Financial, Wall Street Journal)
Scary but not a crash
Stocks from around the world fell sharply Friday to add to weekly losses. The Dow Jones Industrial average fell by 667 points Friday. While certainly a cause for angst, the drop on Friday doesn’t’ rank among the larger drops throughout market history. While the point drop of 667 is more than the 503 point drop from the 1987 stock market crash, the percentage drop in 1987 was a gargantuan 22.6% vs. Friday’s drop of 2.5%.
After last week’s stock drop some see further losses ahead while others see a quick turnaround. Barron’s Ben Levisohn writes “Let’s just accept it - we’re in the midst of a correction, and one that was quite overdue.” Levisohn writes this because of the uninterrupted gains the stock market experienced in 2017 where every month was a positive one. Read on…
What’s next part II
However CNBC notes that there have been 17 times since 1993 that the Dow Jones Industrial average has fallen 500 or more points in one day. On average after those 17 occurrences, stocks had gains of 2.8% one week after the drop. Whether stocks recover quickly or fall further, investors are likely best suited to “stay the course” and wait out the gyrations of the stock market.
Wages pick up, good or bad news?
The Labor Dept. reported wages increased 2.9% in January from a year earlier, the biggest increase since June 2009. While certainly good news for workers the news has spooked bond markets and interest rates have risen. Rapidly rising interest rates can hurt stocks as higher rates make fixed income (cd’s money funds, savings accounts) more attractive.
We mentioned above the October 19, 1987 stock market crash which saw a 22.6% decline. This was the worst one day drop in market history. In which year did the biggest one day percentage gain occur? a. 2008 b. 1933 c. 1929 d. 1987...Answer is below…
Have a good week!
Answer to quiz:
b. 1933. On March 15, 1933 the Dow gained 15.3%.