Steep selloff continues weak 2014 for stocks. Dow tumbles more than 300 points

[question everything]

Source: Yahoo Finance

After a blistering rally that took stocks to record highs last year, January could not have been more different, as the Dow Jones Industrial Average fell more than 5%.

In the first month of the year, traders worried the financial health of both the U.S. and smaller nations meant stocks were too dangerous to continue owning for the time being, especially after a nearly uninterrupted rise that began in early 2009. Those jitters continued on the first trading day in February, driven by weakness in a manufacturing index from the Institute for Supply Management.

(snip)

The Federal Reserve's announcement that it will pare its long-running bond-purchasing program came in mid-December, but the actual implementation didn’t begin until January. However, contrary to commonly held expectations, the scale-back didn't cause rates to rise. What happened instead? Fear won out, sending traders to "save havens" such as gold that are viewed as less risky than stocks in times of angst.


Read more: http://finance.yahoo.com/blogs/breakout/steep-market-selloff-continues-weak-2014-for-stocks--dow-tumbles-300-points-200854326.html

[Common Sense Party]

1. I need to go shopping. I've been looking for some bargain prices on stocks.

5% is not a huge markdown, but it's a start.

[Warpy]

2. ...and 3 bankers have offed themselves within the last week

I wonder if this could be the start of the unraveling of the present robber baron age.

It will be interesting to see how many people have everything in hedge funds.

[Burf-_-]

3. AY TEE AND TEE

Fuck American Telephone and Telegraph. These motherfucks paid those judges to kill net neutrality , NOW KILL THEM !!!

[Keefer]

4. Friday's job numbers

HAVE to be MUCH better than last month or I fear the sell-off will continue or accelerate.

[JoePhilly]

5. The DOW went from about ~14,800 to ~16,700 since November.

I'm not sure why folks seem surprised by the recent pull back. Folks are taking some gains off the table, and letting the DOW cool off some.

[flamingdem]

7. Exactly, it's a correction

Ten percent then back to health but not the gains we had last year.

That is.. if more bankers don't jump, if they do I might change my opinion!

[JoePhilly]

9. lol!

And from what I can tell ... here on DU ... if the DOW goes up, that has no relationship with the broader economy ...

But if it goes DOWN ... the DOW becomes proof that the economy is collapsing.

Looks more like folks taking some gains, using a few bad earnings reports as a reason. Good time to look for stocks that might have dropped simply because the broader market took a hit.

[question everything]

12. If they wanted gain, they should have done in 2013

that is, if their income is more than $250K. Because starting this year, there is additional charge on capital gain on wealthy investors...

Yes, we were told that the market was due for correction, but so much in one month..

[JoePhilly]

13. They did.

And they won't stop taking gains because the capitol gains tax changed. That's the silly lie the RW tells. That people will stop investing because the tax rate goes up.

Let me explain ...

Let's say you can make 100k carrying heavy boxes, and be taxed at 30%.

Or ...

You can make the same 100k through investments taxed at 15%, 20%, 30%, or even 40%.

The GOP thinks that people will stop investing if you go to 20%. Nonsense. In fact, investors would continue to invest and make that 100k even if the tax rate passed the 30% level.

Why ... ? Because it doesn't require carrying heavy boxes, that's why. Its income made while NOT working. Investors like to make money while not working, and they won't stop simply because the tax rate went up a little.

The GOP hopes working people can't figure this out.

As for the size of the correction ... meh ... the DOW rose faster than it should have since that 14,800 number, its due to pull back and a pull back is usually quick.

[adirondacker]

16. While I agree with your theory, I can't help wonder the influence of the cut's in extended UE

and foodstamps, along with budget tightening of the working middle class to afford winter fuel. I think companies are taking a hit on several different levels and fronts.

I'm not trying to be a pessimist, but what's driving stocks to these levels in the first place? Where's the bubble, other than modest gains in the housing sector?

[sendero]

6. I don't buy...

... the back story for this selloff one bit. This has nothing to do with economic realities, if it did the stock market would not have risen ridiculously over the last few years.

No, what is happening is the the Federal Reserve is starting to tighten the money spigot, which they had to do eventually. Even though the tightening is modest, the smart money knows that is the only reason the markets were up and they are running for the exits.

IMHO, of course.

[politicman]

8. I disagree

Even that explanation doesn't make any sense IMHO.

Mid-Last year, the FED suggested it would start tapering and the market sold off. Then the FED reversed course and did not taper and the market was happy.

Then when the FED eventually did start tapering, the market initially went up considerably. Now they want to blame this sell-off because of tapering, when the truth is that tapering started months ago.

The thing is that traders and investors don't make their own analysis of whether to sell or buy, they just follow the trend.
That trend is usually started by some big bank or hedge fund that decides to either sell or buy, and so the rest of the market simply follows so as not to miss out in either direction.

Add to that the fact that the market is full of speculation these days, hardly anyone is actually evaluating stocks to see if they fit the model of an investment.

A market should be a place where people look to invest in companies that are good investments, yet when you see momentum stocks move big in either direction simply because people view them as momentum stocks, then you have taken out all the actual analysis of companies and just going with the rest of the market.

[JoePhilly]

10. The big investors take some gains off the table, and everyone follows ...

then, after some sell off, the big investors buy back in and ride the next wave up.

Then repeat.

One can not only use this model "as-is", but also look for good companies who's stock takes a hit for no real reason. Those stocks will come back more quickly.

[sendero]

15. The big boys..

... know where the "momentum" is going because they create it. The retail "investor" is taken to the cleaners.

The Fed took a trial run at reducing QE a few months back, the markets tanked and they blinked. Now, they HAVE to stop QE and the big guys get it. The installation of a new Fed chief, a "new direction" is the perfect cover to do what inevitably had to be done eventually.

The smart money will move out of the stock market for now and the "retail" investor will take it in the shorts again. At least those not smart enough to see how rigged the game is.

[Morganfleeman]

18. It IS a big part of the equation

Yes, the expectation was that tapering would happen, but we have $20 billion less monetary stimulus now than we did two months ago. That in turn has caused hot money to be repatriated from emerging markets (where a lot of the monetary stimulus had been parked) causing significant drops in EM currencies which has exposed various structural problems in those economies. The market can't often fully price in every consequence of policy because it's often too nearsighted to see what those consequences are. Efficient markets hypothesis is a bunch of bologna.

Then consider how rates have been rising leading to less refinance activity and new home sales.

Then consider the fact that leverage is at all time highs, with margin debt at levels not seen in '07, which magnifies the intensity of any sell-off.

Then consider the freefall of the Japanese yen and markets

Then consider the weak job numbers, the worst ISM report in years, and the big tumble in auto sales (all due to weather, allegedly).

Then consider weak corporate profits.

Then consider cuts to SNAP benefits and unemployment benefits being cut.

I think many of these issues will subside, but it will be bumpy in the process. Argentina could very well go to the IMF which may set off more jitters.

Pullbacks can be healthy in a rising market and often present buying opportunities. We are in somewhat unchartered water though with the sea change in monetary policy. I suspect the Fed will think twice about withdrawing stimulus if we have a weak job print on Friday, but they also need to consider the effect of its monetary policy on emerging markets.

[BodieTown]

14. You Are Correct...

...ignore those who think they know the real answer.

Anyone who has watched this rigged game over the last few years knows exactly what is going on. The run-up over the last years was created out of thin air...but it served its purpose.

The Big Boys are still quite busy transitioning wealth from us to them; they make money on the way up; they make more money on the way down. Ask Goldman-Sachs and the fund "managers" who take home a million a week.

Remember: After the great fall, nothing changed, and nobody went to jail. Everybody (except you and me) got wealthy. It's business as usual, and it's predictable.

Reading "analysis" by right-wing corporate media and the supposed laugh-out-loud "flight" to gold is insipid.

[DeSwiss]

11. ''Ladies and gentlemen the Captain has turned on the fasten seat belt sign.....

...as we're about to experience turbulence. Please disregard the hissing sound you hear -- it is normal in bubble-like vessels such as ours as we lose altitude.''



- K&R

[notemason]

17. A good correction now

so the market is climbing again come next election cycle.