why is the stock market dropping this week
Fear continues to reign on Wall Street. The stock market's terrible start to 2016 got even worse on Monday, with the
shedding 178 points and the losing 1. 4%. The tumbled 1. 8% and got closer to sinking into its first bear market since the one sparked by the financial crisis. The index is now down 14. 5% this year. "It's just a stampede of selling," said Art Hogan, chief market strategist at Wunderlich Securities. The good news is that the markets did make a big comeback from the worst levels of the day. At one point the Dow was down 401 points and the Nasdaq was off 3. 4%. "There's too much fear and too little greed right now," said David Kelly, chief global strategist at JPMorgan Funds. Wall Street was once again spooked by the crash in oil prices. Oil fell another 3% and dropped back below $30 a barrel. Cheap oil is great for consumers but its dramatic downfall continues to alarm investors who fear it signals that something isn't quite right about the health of the broader economy. Energy stocks continue to tank, with down nearly 5%. But those losses pale in comparison with, the energy giant that plummeted as much as 51% amid bankruptcy fears. Chesapeake, but its stock still closed down 33% on the day. The markets are also expressing alarm about European banks. Stock markets in continue to slump badly, with Germany's DAX and France's CAC 40 dropping over 3% apiece. Bespoke Investment Group noted rising "market fears over the solvency -- profitability, liquidity and stability -- of the European banking system. " The firm pointed to a huge rise in the cost to insure European bank debt. It's the "kind of parabolic price action that feels like a crisis, even if there's no concrete evidence that one is afoot," Bespoke wrote. Related: Can U. S. stocks still return 5% in 2016? Few stocks in the Nasdaq have anything to do with oil prices or European banks -- yet the index continues to plunge. Former tech darlings, dropped again on Monday, continuing their 2016 plunge that symbolizes investors' waning appetite for risk. The Nasdaq is now down more than 18% from its all-time intraday high, putting it near the precipice of a bear market on that basis. A bear market indicates a decline of 20% from previous highs. "Tech stocks were the ATM machines. That's where everyone made the most profits. But the bigger they are, the harder they fall," said Michael Block, chief market strategist at Rhino Trading. One of the which tends to rise during times of fear. have soared 12% this year, including a 3% surge on Monday to $1,198 an ounce.
It was gold's best day since December 2014. , which measures sentiment based on several market indicators, is back in "extreme fear" from "fear" last week. Here's another sign of fear: Bond prices are surging as investors flee to the relative safety of government debt. The, which moves opposite the price, slipped to a one-year low of 1. 75%. The market freakout of 2016 keeps getting scarier. Cheap oil and China remain the major culprits. The dropped another 391 points on Friday, leaving the index down an incredible 1,437 points in just the first two weeks of the year. The lost 2. 3% and the plunged 2. 7% to its lowest level since October 2014. The wave of selling dashes hopes that Wall Street's panic attack was over. The Dow had jumped 228 points on Thursday, its. "The sentiment is dominated by fear. Ahead of a long weekend, no one wants to be exposed," said Sam Stovall, managing director of U. S. equity strategy at S P Capital IQ. Friday's market slide was fueled by another crash in crude oil prices and The U. S. stock market descended into some scary territory as well, with the S P 500 briefly breaking below its August 24 low before rebounding above it. "There's a mad rush for the exits! There is one direction to this trade in the immediate term: Lower," said Peter Kenny, an independent market strategist and founder of Kenny's Commentary. Even the White House weighed in on the recent market turmoil. White House spokesman Josh Earnest said on Friday officials are closely watching market movements and their potential impact on the U. S. economy. Related: Worried about stocks? Watch these numbers Stocks have moved almost in lockstep with the price of oil, which plunged another 6% on Friday to as low as $29. 28 a barrel. That's the cheapest it's been since late 2003. Friday's plunge was fueled by signs that sanctions on Iran could be lifted as soon as this weekend, exacerbating the supply glut rocking the oil market. While the oil plunge is great for many consumers because it lowers the price of gas at the pump, it's been a big negative for stocks lately. First, cheap oil eats into already-shrinking profits for energy companies. Many of the biggest losers on the S P 500 on Friday were energy stocks, with plummeting 10% or more. Secondly, the oil crash is raising fears that poor economic performance around the world is sapping demand. After all, oil demand is seen as a strong indicator of growth. "Oil needs to stabilize.
It seems misguided to conclude that equity prices will reverse course and trend upwards when the price of crude continues to trend lower," said Terry Sandven, chief equity strategist at U. S. Bank Wealth Management. Related: Investors are terrified. and they're overreacting Warning signs flash on U. S. economy Also, it's not clear consumers are really spending their gas savings at the stores. The government said on Friday that U. S. retail sales dipped in the critical month of December. That's never good. Economic concerns were reinforced by a new gauge on New York-area manufacturing activity, which unexpectedly plunged in January. Meanwhile, shares of, one of the blue chips of the tech world, plunged 9% as the slowdown in PC demand dented profits more than feared. Stocks in China keep crumbling Wall Street, where the Shanghai Composite plunged another 3. 6% on Friday. That leaves the benchmark index more than 20% below its December high and in a bear market. China's stock market has been rocked by the slowdown in the country's economy and Beijing's failed efforts to stabilize financial markets. The turbulence has t that Chinese authorities have a firm grip on the situation. U. S. -listed Chinese companies took another big hit. , JD. com tumbled 4% apiece, while plunged 5%. Signs of fear in financial markets are present everywhere. On Friday the 10-year Treasury yield briefly slipped below the 2% level for the first time since October. That doesn't happen when things are going well. Gold, which tends to rise when people are scared, popped 1. 4% and to $1,088 an ounce on Friday. , which tracks several indicators to measure market sentiment, continues to flash "extreme fear" and is back in single digits for the first time since the August freakout. Is this the big 'capitulation day'? The latest big losses in stocks have some wondering whether Friday could mark a so-called "capitulation day. " Those scary down days occur when investors give up on the markets and can be a sign of a bottom in prices. "We need a big shakeout to shake off the loose hands. Today might be that day," said Stovall, adding that it could mean the end of the declines is near. Investors should be happy that the S P 500 managed to close above its August low of 1,867. 01 after briefly tumbling below that key level. "That might be an important sign that those lows have become permanent and the market is unwilling to push it below that," said Mark Luschini, chief investment strategist at Janney Capital.
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