Traders Relieved: Dow Closes Only 4% Lower
In what seemed to become a horrible day for investors on Wall Street, it all ended rather well, that is, less bad than most feared: where European and Asian stock markets all plunged 7%-9%, the Dow Jones limited the damage considerably, closing 4% or 300 points lower.
It says a lot about the severity of the economic crisis and fears among investors that a 300 point drop was considered ‘good’ and ‘a hopeful sign,’ but such are the times. Where investors one hoped to earn a reasonable profit on one day, they now aim to limit the damage, hoping that the stock markets will recover soon.
Before the NYSE opened Friday, the Dow’s futures had dropped 550 points, leading many to fear that today would be Black Friday.
“This is beyond volatile. It is chaotic,” Carl Weinberg, chief economist at High Frequency Economics wrote in a morning note to clients. “This is the kind of day when the central banks step into the market with an ‘unexpected’ interest rate move to calm things down.”
The markets opened and they fell considerably… but rebounced, closing higher than most expected, albeit lower than yesterday.
Since mid-September Dow Jones stocks have lost $7 trillion in value. That is a, by all means, high amount, but today marked, as the AP put it rather well, simply yet “another day’s loss, one in a series.”
Although many hoped that the so-called bailout would instantly revive the economy, the fact of the matter was that its goal was not to do any such thing: rather, it was to restore confidence somewhat (which took more time than the government hoped indeed) and to prevent the U.S. economy from collapsing suddenly. Many days of losses such as the once that occured today are likely to follow; that’s bad, but considerably less bad than a sudden collapse of the stock markets, similar to the crash in 1929, which destroyed entire businesses, stock markets and even economies in just one day time.
