By:
Lissette Saca
August 4, 2011 5:30pm
Today was a grim day on the floor of the New York Stock Exchange (NYSE) as the closing bell rang announcing the end of the trading day. The market closed at 11,383.68, a decrease of 512.76 points and 4.31% lower than the average. This free fall in the numbers caused the US markets to lose their entire gains for the year. The reason for this plunge? Fear on the part of investors caused by debt and data numbers which indicate domestic and global economic slowdowns. On the domestic front, the US debt crisis and uncertainty in the future of the US economy caused many stock market investors to sell their stock. Unemployment levels at 400,000 also caused volatility in the market, pending the release of tomorrow’s employment situation report for the month of July. The consensus level for tomorrow’s report is not expected to be all that great, but there are still high hopes.
On the global side, investor fears of the European debt crisis also contributed to the DOW plunging more than 500 points today alone. As debt problems in Europe spread from Greece to Spain to Italy, Japanese and European central banks and policymakers began to take measures in order to avoid default, which caused increased volatility in today’s market. Investors fear that US markets might be affected, which has caused alarm and panic in the market, adding to the urgency of investors to sell. Additionally, a loss of more than 3% in European markets has also increased the fear amongst investors. Italy is the 8th biggest economy and the possibility of default has investors spooked.
Today’s numbers caused many questions about the future of our economy. Mainly, is another recession possible? Should I sell or stay on my stocks? Despite the fact that today’s market numbers show the worst sell off since the 2008 financial crisis, market analysts are urging long-term stockholders not to sell. The reason for this is that it is too much of a risk to sell, as you must be right twice; once when you sell (to make sure that you get the best value for your stocks) and again to know when to come back and re-enter the market. Analysts will be keeping a close eye on foreign markets to see if the sell-off continues when they open at 8pm EST. Regardless, there is still hope in tomorrow’s employment level numbers, which could cause stocks to rally back. Let’s keep our fingers crossed!