(1888PressRelease)
May 23, 2009 - This week's sell-off accelerated Thursday, with major market indicators sliding more than 1.5 percent, cutting nearly 130 points off the Dow Jones industrial average.
Investors were unnerved that a credit agency warning about the British government's debt ratings could signal similar problems for the United States. Many were already starting to think the market moved too high, too fast over the past two and a half months. The Standard & Poor's 500 index is still up more than 30 percent from 12-year lows in early March.
"People are nervous after what they've just been through," said Morgan Singleton Associates President, Katherine Davies. "A pullback of 7 to 10 percent is absolutely appropriate, but if it goes further than that which suggests the market is more skittish than people think," the Morgan Singleton Associates President said.
Indicators of investor anxiety spiked. Wall Street's fear index or VIX, a gauge of stock market volatility, jumped more than 8 percent. The VIX had been easing steadily since early March, and investors were encouraged earlier this week when it fell below 30 for the first time since September. On Thursday it rose back above that level, closing at 31.35.
Meanwhile, gold prices hit a 2-month high as the selling on Wall Street led investors to seek safety. Bond prices slumped after the Treasury announced another round of debt auctions next week, which will increase the supply of bonds in the market, and the British government debt warning.
The market pulled off its lows following a late-day surge of 15 percent in General Motors Corp. GM had announced earlier in the day a key agreement with the United Auto Workers on concessions that could help the struggling automaker restructure outside of bankruptcy court.
The Dow fell 129.91, or 1.5 percent, to 8,292.13, after earlier falling as much as 201 points. The Standard & Poor's 500 index fell 15.14, or 1.7 percent, to 888.33, and the Nasdaq composite index fell 32.59, or 1.9 percent, to 1,695.25. Standard & Poor's rattled investors when it said Britain may have its rating cut because of rising debt levels. That would raise the cost of borrowing for the British government, which is taking a big role in bailing out that country's stricken banking system, and could mean similar warnings for other countries including the United States.
"It raises questions about our own situation in terms of our deficits and our national debt," said Davies, of the S&P report. "There are limits to how high you can take these numbers longer term."
Even with governments pumping huge amounts of money into economies around the world there are questions about how soon a rebound might take hold. In the U.S., home prices are still sliding and unemployment remains at a 25-year high. The Labor Department reported Thursday that continuing claims for unemployment benefits set their 16th straight weekly record.
Stocks wavered this week amid disappointing data on housing starts and a downbeat economic outlook from the Federal Reserve. On Wednesday, stocks gave up early gains and ended lower after the Fed said the economy was likely to shrink by more than forecast this year and that unemployment could rise as high as 9.6 percent, also worse than previously expected.
Morgan Singleton Associates are highly respected within the financial community and have been providing accurate evaluations for over three decades. Working alongside Industry leaders Morgan Singleton Associates recognizes the dramatic need for major changes, with a passionate commitment to business growth. Morgan Singleton Associates provides a full range of integrated services and products simultaneously directed at producing strategically predetermined business and cultural results. We bring together a broad range of talent and resources with a passion for integrity, continuous improvement and the desire to make a difference. This results in prosperity for our customers, society and ourselves.
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