January Wall Street Crash
It’s official, trading for the month of January is now officially over and the news is wrose than expected. Stocks wrapped up their worst January on record with a final plunge on Friday.The Dow Jones Industrial Average finished January down 8.84% on the month. Perviously, the worst January for the Dow had been that of 1916, when it fell 8.64%. That’s 1916!
Friday, the Dow dropped 148.15 points to 8000.86 after briefly dipping below the 8000 mark. The Dow has fallen five straight months and in 12 of the last 15.
We have anew president but that’s not changing the mess we’re in any time soon. In fact, it’s going to get much worse before it gets better. Obama says his plan would ensure corporate chief executives do not siphon away tax dollars to fund big bonuses, expressing outrage again at reports of big pay-outs in 2008 despite massive job cuts, financial losses and government bailouts. “We learned this week that even as they petitioned for taxpayer assistance, Wall Street firms shamefully paid out nearly $20 billion in bonuses for 2008,” the president said.
The president said he would insist on “unprecedented transparency, rigorous oversight, and clear accountability” for funds that went toward stabilizing the financial system. “While I’m committed to doing what it takes to maintain the flow of credit, the American people will not excuse or tolerate such arrogance and greed.”
The S&P 500-stock index lost 2.28% Friday to end at 825.88, for cumulative losses in January of 8.57%. Until Friday, its worst January from 1929 onward occurred in 1970, when it lost 7.65%. Both stock-market indexes are off by more than 40% from their 2007 highs. Traders cited fears that plans wouldn’t go forward for a so-called bad bank to soak up toxic assets from financial institutions, and bleak economic news, in particular Friday’s report of a 3.8% contraction in fourth quarter GDP.
A slew of layoff announcements, skepticism of the Obama stimulus plan, and a series of bleak earnings reports all crunched U.S. stock markets over the course of the week. Those developments left investors who exited stocks last year with little desire to put their money to work in the markets, limiting any stock rallies. “I don’t think anyone is willing to put money to work until we get clarity out of the new government,” said Matthew Cheslock, managing director at Cohen Capital Group LLC.
Investors have grown wary of efforts to right the ship. The Obama stimulus plan has received a lukewarm reception among market participants and buzz about the possible creation of a “bad bank” to soak up toxic assets has waxed and waned, perplexing investors. After a three-day jump to start the week, the bottom dropped out for stocks on Thursday and Friday.
The bottom line is that we’re not in control and we’re finally coming to that realization.
