Stocks fell on the fears that continuing credit crisis, increasing banking sector problems, slower 3rd quarter earnings results by the companies, record high oil prices, and slide in dollar will slow down the economic growth.The S&P500 lost 62 points, the Dow lost 570 points and the NASDAQ lost 84 points for the week ending October 19th, 2007.
Dow lost almost 367 points on Friday, Oct 19th, the third biggest drop of the year.Disappointing earnings from the key companies like Caterpillar,Honeywell and others have raised concerns about weaker third quarter profits. Many banks like Citigroup, Bank of America, J.P. Morgan, Wachovia, and others announced that the credit crisis and home loan problem have lowered their profits.Oil prices hit an all-time high of over $90 a barrel (1 barrel equals to 42 US gallons)causing concerns that high oil prices will increase the cost for the consumers and the companies.The dollar fell to a new record low against the euro and slipped against the yen. Let us see what happens next.
Jobless claims rise
The Labor Department reported that 28,000 newly laid off workers filed for unemployment benefits.This news is worrisome because it is the largest increase since early February, this year.It could be a sign that the labor market is starting to weaken under the credit crisis and home loans problem that we talked about in August.
Unemployment report can help to determine how well the economy is holding up under the current credit crisis, declining housing market, and liquidity concerns that we have talked about in the last few weeks. Employment is important, because, without jobs people do not know when they will find their next job.If people do not have jobs, they don't want to spend money and buy goods.When people do not buy goods, then businesses cannot sell what they make.Businesses soon start to reduce the number of people they need.Soon unemployment starts to increase.This starts the cycle that is not good for the people and the economy.
Sony cuts PlayStation 3 price by $100!
Sony dropped PlayStation 3 price in the US by $100.Now PlayStation 3 with a 40 gigabyte hard drive will cost $399.People were expecting Sony to drop its PlayStation 3 prices for some time to be closer to its competitors like Microsoft’s Xbox 360 for $349 and Nintendo’s Wii for $250.Also see Volume 11.
Wal-Mart cuts price on 15,000 items for the holiday season
Wal-Mart is cutting prices in 15,000 items and plans to cut more prices in the coming days to increase sales for the upcoming holiday season.Early this month, Wal-Mart already cut prices on some popular toys.Price cuts by Wal-Mart will surely put pressure on other companies to cut their prices or lose the customers to Wal-Mart.This is good news for the holiday shoppers.
What is "Black Monday"..."Crash of 87"?
Twenty years ago, on October 19th, 1987, the Dow lost 22.6% in one day or 508 points, based on Dow's level at that time.This day is known as the “Black Monday” or “Crash of 87”. The term Black Monday is also applied to the Dow's drop on Monday, October 28, 1929, which started the stock market crash of 1929.
October 19th, 1987 was the worst one-day point drop ever for the Dow at the time, and remains the second largest percentage point drop in the entire history of Dow. At today's levels, this percentage drop will be equivalent to a 3,200 points loss in one day!
Many experts believe that the 1987 crash was caused by many things.For example, computer trading systems were not mature enough to handle the massive selling by the investors. Over priced stock market and uncertain economic conditions added to the nervousness of investors. No one knew what was going on in the stock market which made more people nervous and panic selling continued. It is interesting to note that within two days, by October 21, 1987, the Dow had regained about 290 points back. In fact, October 21, 1987 is the single largest one-day percentage increase (10.15%) since 1933.
Since Black Monday, many changes have been made to improve the stock trading computers and the process. Can it still happen? Possibly.
Learn more about...
What is Credit History? Why is it important to have a good credit history? Volume 12.
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