What happened on Wall Street?
by Peter Switzer
Wall Street got the overdue wobbles over the weekend with the Dow off over 200 points! So, what happened?
The main drivers were some worrying company results, which have then been used to make negative assumptions about global economic growth going forward.
All I can say to that is — “well, der.”
Let’s go straight to the scoreboard to see how bad the results were. The Dow lost 205.43 points or 1.52 per cent to finish at 13,343.51 while the S&P 500 dropped 24.15 points or 1.66 per cent to end at 1433.19. It’s worth noting that around 1420 is a key resistance level and so closing above that point is a positive.
We should keep all of this in perspective, despite the fact we will sell-off today on the local stock market. The Dow was up 0.11 per cent for the week and is 9.22 per cent higher for the year. The S&P 500 was up 0.32 per cent for the week and 13.96 per cent for the year.
However, the VIX or fear index is creeping up and is now at 17.06, where a reading such as 14 had been regular when the markets shot up between June and September. So investors are more nervous and some weak company results combined with the belief that a pullback was overdue can explain the Friday sell-off on Wall Street. It was always going to happen — especially in the month of October, which has hosted a few market crashes, but I don’t think it is on the cards this time unless some left-field event happens.
So, let’s identify the triggers for the bad day for stocks in New York:
- GE reported earnings in line with analyst’s predictions but revenue was down, so the results were created via cost reductions
- McDonalds missed on earnings but beat on revenue so at least the Yanks are eating at Maccas.
- Google’s underperformance is worrying analysts and its share price is diving.
- Microsoft missed on earnings.
- Existing home sales were down on expectations.
- Germany is making life hard for the EU’s bailout fund to help troubled banks in places such as Spain.
- And the Spanish Prime Minister is still playing silly games over whether he will request a bailout. He needs to request a bailout to gain assistance but that will mean he will have to cop imposed austerity measures which could deal a fatal political blow to his re-election chances.
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Published on: Monday, October 22, 2012
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