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Why the Stock Market is Having a Worse Monday Than You

Using a smartphone to calculate data

U.S. stocks are experiencing another rough trading day on Monday after the Dow Jones fell roughly 350 points in late morning trading and oil prices slid below $30 a barrel.

Fears of a global economic slowdown, in particular Deutsche Bank DB and Europe's banking system, have left investors feeling rattled. DB stock hit an all-time low on Friday, closing in New York at $16.88 per share. And on Monday, Germany's largest bank is trading down over 8% as of 3:12 PM EST.

According to Business Insider , Peter Tchir, a strategist at Brean Capital, "notes that credit spreads for both Deutsche Bank and European companies as a class have increased sharply in just a few weeks. And while these levels remain well below what was seen during the financial crisis, there's been an abrupt move, and these banks are now regarded as significantly riskier than they were just a few weeks ago."

Declining oil prices and a sell-off led by the tech industry from last Friday have too added to Wall Street's disappointing performance.

Director of investment strategy at Glenmede Jason Pride used a Super Bowl football analogy to sum up the U.S. stock market's current state: "The U.S. is facing 3rd down and long," he told clients in a report. "The expansion remains intact, but economic indicators are signaling mounting weakness on the margin."

Oil

U.S.-produced crude oil dropped 2.6% after a meeting between oil giants Saudi Arabia and Venezuela did not reassure investors about the state of the industry or measures being taken to strengthen prices.

Demand for crude oil has long been considered an indicator for global economic health, and markets across the world are tracking the rise and fall oil prices, and will continue to do so until the commodity stabilizes.

The Dow Jones

As of 1:56 PM EST, the Dow Jones has fallen just over 388 points, or 2.4%.

This follows another big point drop back on January 15, when the Dow plunged 391 points at the end of the trading day.

The S&P 500

The S&P 500 is off about 2.5% in afternoon trading.

The NASDAQ

The NASDAQ composite has tumbled over 3% so far today, continuing its poor performance from last Friday. It is now officially on the cusp of turning into a bear market.

Investors are fast exiting the composite's winning stocks from last year: Alphabet GOOGL , Amazon.com AMZN , Facebook FB , and Netflix NFLX ; these companies have slid drastically as a result. According to USA Today , investors are moving into "more defensive corners of the market" like utilities.

Global Equities

London's FTSE has dropped 2.65%

Germany's DAX has fallen over 306 points, or 3.30%.

The CAC 40 in Paris was off 3.20%.

Many Asian share markets were shut for the Lunar New Year holiday. Chinese markets will remain closed this entire week.

Final Thoughts

In general, the global economy has had a rough 2016 so far. The kind of drops we have seen today, and have seen since the New Year began, are more common than what we would like to see. Investors need to prepare themselves for a persistently volatile financial environment.

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AMAZON.COM INC (AMZN): Free Stock Analysis Report

NETFLIX INC (NFLX): Free Stock Analysis Report

DEUTSCHE BK AG (DB): Free Stock Analysis Report

FACEBOOK INC-A (FB): Free Stock Analysis Report

ALPHABET INC-A (GOOGL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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