On Friday, the stock market fell sharply on two major headlines:
Hungary may be the latest contagion victim and a serious economic
problem for the rest of Europe, and the U.S. jobs report did not
Stocks entered Friday with two successful days and a gain for
the week for the
) of more than 1%. But heavy selling throughout Friday ended with
Dow Jones Industrial Average
) off 3.15%, the S&P 500 down 3.44%, and the
) falling 3.64% for the day. The S&P 500 ended the week with a
loss of more than 2%.
The Dow's worst performer was
), off 5.5%. American Express Company (
) fell 5.06%,
The Boeing Company
) was down 4.68%,
) fell 4.57%, and
General Electric Company
) lost 4.5%. The Dow fell 2% for the week, and closed below 10,000
for the second time in two weeks.
Of the two reports that shocked the market, the real surprise
was that Hungarian officials had said that economic conditions were
so bad there that a default was not out of the question. And there
was talk of yet another possible bailout by the European Union (
) with perhaps more former eastern-zone countries in the wings. In
response, the euro closed at a four-year low of 1.1956.
Even though the jobs numbers were not as shocking as the newest
EU problem, the report still contributed to the losses since many
had been encouraged by the White House's recent optimism over jobs
and the economy. But non-farm payrolls, which were expected to show
an increase of 500,000, instead increased by only 431,000.
The Wall Street Journal, in its summary of Friday's sell-off
opined, "In part, Friday's market gyrations were caused by a hasty
reassessment of a theme many traders had bet on recently -- that
the U.S. is a relatively safe place to invest at a time when other
countries are still struggling." But the jobs numbers and the
impact of the European situation make everyone reassess the
possibility of a double-dip recession.
At the close, the Dow fell 323 points to 9,932, the S&P 500
lost 38 points to 1,065, and the Nasdaq was down 84 points to
The NYSE traded 1.6 billion shares with decliners ahead of
advancers by more than 9-to-1. The Nasdaq crossed 688 million
shares, and decliners there were ahead by almost 8-to-1.
July delivery crude oil fell $3.10 to close at $71.51 a barrel,
primarily on the sharp drop of the euro versus the greenback. The
Energy Select Sector SPDR
) fell $1.88, closing at $51.55.
August gold rose $7.70 to $1,217.70 an ounce, but the
PHLX Gold/Silver Sector Index
) lost 4.15 points, closing at 169.09.
What the Markets Are Saying
In the April 20
Daily Market Outlook
, just four days before the market topped, I said, "With internal
and sentiment indicators telling us that the market is now
dangerously overbought and the 'Sell in May and Go Away' strategy
triggering a sell, it is time to go to cash on all rallies. It
doesn't get much better than this, so it will most likely get
worse." I was correct; however, I had no idea that we were
facing the worst May since 1940.
So I think it important to emphasize that it wasn't just the
trite little saying that blindly encourages some market-timers to
liquidate their stock holdings on May 1 that triggered my above
recommendation. Despite the method's positive record, it would be
unwise to counsel anyone to take an all-or-none approach based on a
Instead it was our well-seasoned technical signals, both the
internal and sentiment indicators, as well as chart analysis
together with the May to September negative record that drove me to
conclude that this May could be nasty. A "perfect storm" of
negative indicators appeared to be descending on the markets. As
one friend so generously put it, "It's better to be lucky than
Last week, another friend made an interesting quip concerning an
often-repeated Wall Street saying, "The two emotions that move
markets are fear and greed." He said, in his experience, there was
but one emotion, and that was fear, saying, "Fear is the greatest
motivator in any circumstance."
He went on to say that in the stock market it is not greed that
drives investors and professional managers to take enormous risks
at the top of a market, but fear that they will be left behind. And
at market bottoms, it is, of course, fear that even drives
long-term investors to liquidate their holdings at the very bottom
of a bear market.
Fear has again overcome the stock market with visions of a
double-dip recession and contagion in the air. So it is possible
that today may start with another early rush to sell, based on
Friday's escape to the "traditional investor "safe havens" gold
futures and Treasuries.
If the market closes below the February/May lows, we could see a
quick plunge to S&P 1,000. But let's not rush into this battle
between the bulls and bears. With the
CBOE Volatility Index
) up 20% last week, it's time to stand aside until we determine the
real winner of this conflict.
Today's Trading Landscape
Earnings to be reported before the opening
Earnings to be reported after the close include:
C&D Technologies, Casella Waste Systems, FuelCell Energy and
Economic report due:
consumer credit (the consensus expects $1 billion).
5 Money-Doubling Tech Stocks
Now that the recovery is under way, companies are spending money
hand over fist for technology goods and services. And that means
big things for these tech stocks. Each one trades for less than $10
a share AND is set to double in the next 12 months.
Get their names here.