Monday, August 24, 2015

Markets crash in one of the wildest days in history

After this explosive day Dow finished down a massive 588, decliners over advancers an astonishing 18-1 & NAZ gave up 179.  The MLP index sank 11 to the 332s (down 225 from last year's record highs) & the REIT index dropped a huge 12+ to the 302s.  Junk bond funds went down 2-4% while Treasuries were bought as safe haven investments.  This is discussed below along with the brutal day for commodities.

AMJ (Alerian MLP Index tracking fund)

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CLV15.NYM....Crude Oil Oct 15....38.36 Down ...2.09  (5.2%)

Live 24 hours gold chart [Kitco Inc.]

Oil prices fell more than 6% to fresh 6½-year lows as markets worried about a China-led global economic slowdown that would drastically hit oil consumption at a time of plentiful supply.  Chinese stock markets suffered their biggest one-day drop since the financial crisis, stirring huge sell-offs in global equities & commodities, with more than €400B ($465B) wiped off Europe's FTSEurofirst 300 share index.  Brent oil hit an intraday low of $42.51 a barrel, down 6.5% ($2.95).  US light crude was down $1.93, or 4.8%, at $38.52 a barrel, after falling below as $38 (its weakest since Feb 2009).  Steep losses last week led to the contract's longest weekly losing streak since 1986.  Multi-year lows in oil prices have so far failed to trigger action from the world's top producers to rein in output, though Iranian Oil Minister Zanganeh said that holding an emergency OPEC meeting could be effective in stabilizing prices.  There was a similar call by Algeria earlier this month, but other OPEC delegates said no meeting was planned.  Zanganeh also said Iran would defend its oil market share by ramping up production as soon as possible.  "We will be raising our oil production at any cost and we have no other alternative," he said.  "If Iran's oil production hike is not done promptly, we will be losing our market share permanently."

China Concerns Cause Broad Commodities Plunge

Stocks dropped on in tumultuous trading, as traders raced into safe-haven assets.  Despite th e still-heavy selling, the markets actually bounced back substantially from the lows of the day within less than an hour of the opening bell (after the Dow had been down 1089 at the lows of the session).  The Dow & NAZ were in correction territory mid-day, having fallen 10% from a recent high.  The latest round of selling comes on the heels of the worst week for the broad S&P 500 since 2011 that stripped more than $1T in market value from US equities.  Global equity markets faced selling across the board on the day.  Traders took cover in a variety of safe-haven assets.  The yield on the benchmark 10-year Treasury bond fell 0.06 percentage point to 1.99%, falling under the 2% mark for the first time since Apr.  Bond yields move in the opposite direction of prices, so as traders bid-up the asset, yields fall.  Every major S&P 500 sector was in the red, led by economically-sensitive players, like financials & energy.  Meanwhile, defensive stocks, like telecommunications & utilities were spared the brunt of the selling.  Commodities were under heavy pressure across the board.  US crude oil plummeted 5.4% to $38.27 a barrel, striking a fresh 2009 low.  Brent crude, the global benchmark, fell below the $45-a-barrel mark for the first time since 2009.  Copper, seen as a bellwether for global economic conditions, skidded 2.8% to $2.24 a pound.  Gold prices were little changed at $1157.  In a sign of the intensity of the selling, trade in S&P 500 & Nasdaq 100 futures was repeatedly halted early in the day after the contracts hit the 5% overnight limit.  NYSE also invoked "Rule 48," which is used in times of high volatility to smooth the open of trade.

Flight to safety: U.S. stocks suffer heavy losses

What's there to say?  Stocks had a memorable day with one of the craziest times ever.  There was significant buying after the initial plunge.  Then selling resumed in the PM.  There is no point trying to make sense out of these swings.  The volatility index (VIX) jumped 9+ to the 37s (after reaching the 53s), which compares with lumbering along around 12 for much of the year.  With buying at the close, Dow fell more than 10% this month alone (the test of a bear market) & was unable to close above the important16K support level.  A lot more exciting trading is ahead for the stock market!!   

Dow Jones Industrials

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