The Dow Jones Industrial Average has closed beneath 10,000 points for
the first time since February 8. Despite trading above 10,000 for most
of the day, the Dow began to falter around 2 pm, eventually closing at
9,974.45. The Dow first crossed the 10,000 point line in March 11, 1998.
As Bill McBride puts it
, "For investors this has already
been a 'lost decade' and more." What happened and why?
Volatility and Investor Uncertainty The New York Times quotes market
strategist Joe Battipaglia, "It is hard to say if it is one bit of news
or one development [causing the downturn]. But in the context of where
investors want to be, there is no conviction on the short side or the
long side. The market is stuck in a violent trading range of wide swings
without any particular conviction and the market is now dominated by
momentum trading." The Times also quotes another strategist Guy LeBas,
"There is a very heightened degree of volatility. ... And we don't
expect that volatility to go away any time soon."
'Rabid Bat' Market Daily Beast's Randall Lane dismisses the
bear and bull. "What Wall Street, and business in general, abhors is uncertainty.
And the results from Tuesday--indeed, from most of this month, starting
with the May 6 'flash crash' which still hasn't been fully
explained--resemble an animal pattern more akin to a rabid bat. Just look
at the feeble factors driving the markets plummet on Tuesday: saber
rattling in Korea and new debt problems for some of the European Union's
sicker members. ... Wall Street would normally steamroll over such
news." But it hasn't, because it is a rabid bat.
Market Instability Time's Stephen Gandel observes,
"What is clear is that whatever direction we are headed, the captain has
put on his fasten your seat belt sign. The stock market turbulence is
actually a result of much bigger problems brewing than just the European
debt crisis. So European bailout or not, big drops and jumps like today
are here to stay." He gives three reasons: (1) "The first big thing that we are missing is
average investors." (2) "China may be in a bubble as well. So Bye, bye
global growth story." (3) "We have also lost the sense that stock
deserves an equity premium."
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