Stock Market Plummets 7/31/14

Discussion in 'Politics' started by Runningw235, Jul 31, 2014.

  1. #1 Runningw235, Jul 31, 2014
    Last edited by a moderator: Jul 31, 2014
    Okay, maybe "plummet" isn't the right word, but here are the major indexes today:
     
    Index Value Change Net / % NASDAQ 4369.77<div>
    • -93.13 
    • â–¼
    • 2.09%
    NASDAQ-100 (NDX) 3892.50
    • -83.57 
    • â–¼
    • 2.10%
    Pre-Market (NDX) 3945.70
    • -30.37 
    • â–¼
    • 0.76%
    After Hours (NDX) 3893.21
    • 0.71 
    • â–²
    • 0.02%
    DJIA 16563.30
    • -317.06 
    • â–¼
    • 1.88%
    S&P 500 1930.67
    • -39.4 
    • â–¼
    • 2.00%
    Russell 2000 1120.07
    • -26.5 
    • â–¼
    • 2.31%

     
    Data as of  Jul 31, 2014
    View Major Indices
    </div><div> 

    </div>Read more: http://www.nasdaq.com/#ixzz395LPXBXo
     
     
    [​IMG]
     
     
    The Fed concluded it's meeting yesterday and released a typical statement that doesn't lend much credence to their likely actions in the coming months. We know QE is supposed to end in October, but we aren't sure when interest rates will be increased. My bet is first or second quarter of next year. 
     
     
    So what do you guys think? Is this a one day fluke, the beginning of a correction, a result of world news, or something else?
     
     
    I'm putting my money on correction. My goodness I am glad I sold my equities a few days ago! It's certificates of deposit for me for the foreseeable future.

     
  2. If I knew anything about the stock market I would be able to answer. I wish i did.
     
  3. Too early to say, but I do think there is a bubble that has to burst sometime.
     
    Until then.....
     
    https://www.youtube.com/watch?v=eDd-GXkMrJs
     
  4.  
     
    I don't follow stock indexes, do you have more data? 
     
    wtf does down 2% mean? Does that happen;
     
    never
    every 25 yrs
    every 10 yrs
    every 5 yrs
    every yr
    every qtr
     
     
    Is that all the major stock markets? Are some up 2% as well?
     
     
    you get the idea. 
     
  5. #6 garrison68, Aug 1, 2014
    Last edited by a moderator: Aug 1, 2014
    The S&P 500 is up 15% for the year, which is pretty high.  This drop today is only a dip, not a big correction.  If it drops more, it may be a good time to buy.   
     
  6. There's been something like 15 major banker suicides this year.
     
  7. Wage increase, production increase. Tax revenue decrease. Boys interest rates are hiking up. Better drop out now.

    DOW industry. dropped 300 points. That's a lot for a global market.
     
  8. #9 garrison68, Aug 1, 2014
    Last edited by a moderator: Aug 1, 2014
    It's still way high.  It's been doing great for a few years.
     
    I'll be on the alert to do some stock shopping next week if it drops a lot more.  
     
  9.  
     
    2% means since the last close (4pm Eastern Time, U.S.), when trading stops until the next morning, it's value has decreased 2%.
     
    So if at 4pm yesterday it was worth $100, it is worth $98 at the end of the day today. 
     
     
    There are a TON of indexes, but the majority of them are correlated and/or overlap, so it's basically a bad day for all United States equities indexes. 
     
    I'm pretty sure that on the whole this is the biggest drop of the year. It's certainly not a crash like 2008 yet.
     
  10.  
     
    I would wait until we know more about when interest rates will increase. Just my $0.02.
     
  11. How come? 
     
  12. #13 Runningw235, Aug 1, 2014
    Last edited by a moderator: Aug 1, 2014
     
     
    Interest rates, led by the Fed's prime rate, are likely to be increased sometime by next March (if I had to guess). 
     
    When interest rates increase, the  market loses liquidity and prices sink after a prolonged near-zero interest rate policy. 
     
    So, if you were to buy in a month and interest rates are increased the next month, my thinking is you would lose a lot of value.
     
     
    The reason stock prices dropped drastically today (regardless of any bullshit about Russia, etc. that talking heads will reference) is that the Fed met Tuesday and yesterday. They released a pretty generic statement. Because of some positive (supposedly) indicators like GDP, inflation indexes, numerous other things, people are getting scared that the fed will raise  rates and their equity will decline in value.
     
    Just the slight potential of them raising interest rates in the somewhat near future shook the market. You don't want to be there when interest rates actually go up. 
     
    When (not if) rates increase is certainly up for debate, though. 
     
    Edit: Disclaimer: This is not intended to be legal or professional advice. Invest (or don't) at your own risk.
     
  13. This is definitely relevant if we were speaking about bond markets, but interest rates cant give you a full explaination of equity returns.

    Realistically, what you'd mentioned about earning reports is more realistic. This week specificially many companies released quarterly reports.


    Although If its drastic drops across all sectors, I.e. S&P500, Russel AND the DJ, Its a larger, macroeconomic factor.
     
  14. I'm all stocked on toilet paper and cigarettes. Let the collapse begin!
     
  15. #16 Runningw235, Aug 1, 2014
    Last edited by a moderator: Aug 1, 2014
     
     
    This is what occurred today, and myself and many others argue that it's trepidation regarding fed policy. 
     
    It doesn't give a full explanation of returns, but we can see historically (and theoretically) the relationship between rate changes and equity prices after prolonged periods of lower than market rates. The fact that we have had such  low rates for so long is more noteworthy than the eventual increase. Even Janet Yellen alluded to some "frothiness" in equities. 
     
    As the market loses liquidity, certain individuals and institutions become less able to buy or borrow. Also, people like me are scared of this effect and sell off as a subsequent result.
     
    So as it is not a direct result, it is an indirect one that we see time and time again. Less spending and less borrowing (after a prolonged period of being stimulated) negatively affects stock prices, not immediately, but shortly after. 
     
    Quantitative easing for intents and purposes of this topic does the same thing.
     
  16. Well unfortunately equity returns are not convex like bond returns so we can't accurately determine how a stock will react to a change in interest rate, because its not that type of asset.

    Fed funds rate has been set low for quite a while to stimulate growth as you've said...perhaps its time for them to sell back bonds and raise it up a bit

    Sent from my SAMSUNG-SGH-I337 using Grasscity Forum mobile app
     
  17. #18 Runningw235, Aug 1, 2014
    Last edited by a moderator: Aug 1, 2014
     
     
    Your correct. There is no direct cause-effect relationship. We can generally understand which direction they'll go, though. People have been doing it for quite a while. 
     
    With regard to you last sentence, I believe they've scheduled an end to bond purchases in October, so we know that's going to happen.
     
     
     
     
    Here's a good analysis of the Dow and Nasdaq are affected by changes in the Fed Funds rate:
     
     
    http://economics.gcsu.edu/papers/ja01-01.pdf
     
     
    Undoubtedly, like you are saying, there are many other factors and the cause-effect (if that's what it is) is certainly not direct, but the relationship is noteworthy.
     
  18. Quit ciggarettes now. It'll make your post-collapse experience much better.
     
  19. #20 Sam_Spade, Aug 1, 2014
    Last edited by a moderator: Aug 1, 2014
     
    They're barter cigarettes. The currencies of the future! My neighbour is a master in jerky-making and distilling booze. Together we will rule like kings.
     

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