The stock market today is down more than 200 points as China fears trigger a global sell off.
In mid-morning trading, the Dow dived 205.75, 1.39%, to 14,593.65. The S&P 500 slumped 25.78, 1.62%, to 1,566.65. The Nasdaq slid 50.78, 1.51%, to 3,306.47. The Dow and S&P are now off some 5% and 6% respectively from their all-time highs reached earlier this year.
Asian markets were clobbered Monday and European markets melted on increasing fears of a liquidity crunch in China. Major Euro indexes, off roughly 10% from their April highs, are officially in bear territory.
Today's moves continue the rollercoaster ride U.S. equities were on last week, with the Dow shedding 560 points, or 3.66%, over Wednesday and Thursday.
The blue-chip benchmark finished at 14,799.40, down 1.8% for the week, its worst week since April 19. The S&P 500 fared worse, slumping 2.1% last week to end at 1,592.43. The Nasdaq ended at 3,357.25, for a weekly loss of 1.9%.
The VIX, or the CBOE Volatility Index, soared 10.2% last week, ending at 19. Wall Street's "fear gauge" has risen four of the past five weeks, ever since Fed Chief Ben Bernanke's first mumblings about a probable winding down of stimulus.
Monday morning, the VIX jumped 2.14, or 11.23%, to 21.04, its highest level of the year.
Markets were goosed Friday after The Wall Street Journal's Fed watcher Jon Hilsenrath wrote that investors may be misreading optimistic messages sent by the Fed Chairman Ben Bernanke as hawkish.
Also, Goldman Sachs (NYSE: GS) analysts said their top recommendation for 2013 is still to buy stocks and sell bonds.
"We continue to expect the index [S&P] will close the year at 1,750, a rise of approximately 10% from today's top level. However, median historical drawdown episodes suggest at some point during the next six-months that the S&P may decline to mid-1,500s before resounding to our year-end target," Goldman's analysts wrote.
Further giving stocks a lift was a bullish statement to CNBC from renowned hedge fund manager David Tepper, founder of Appaloosa Management: "All the concerns in the markets is because the Fed sees the economy stronger in the future. In fact, their forecast shows that they will wait until a lower unemployment rate (closer to 6% than 6.5) to raise interest rates. So they are a bit easier on the front...I obviously thought they should start to taper. [But] the bottom line when the dust settles [is that the] only one place to be [is] stocks."
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Is the Soaring Stock Market Hiding a Darker Truth?
In my role as executive editor, I subscribe to dozens of newsletters, wire services, trade journals and news-bulletins. They roll into my e-mail box each day like an eight-hour-long avalanche.
Usually, I just open the ones that happen to catch my eye. One was this recent headline from a MarketWatch.com bulletin that said, "Dow closes at highest level since December 2007."
My first thought was that the bulletin should have said: "Dow closes at highest level since December 2007 - despite faltering economy, stubborn unemployment, accelerating inflation and the highest level of uncertainty we've seen in decades."
I guess they couldn't fit all that into the subject line box.
My second thought was that Martin Hutchinson was right - again.
You see, for the last couple of years the administration in Washington and the so-called experts on Wall Street have repeatedly told us that inflation isn't a problem. They continue to insist that the bailout plans and easy-credit policies that were used to end the financial crisis have yet to ignite the rise in prices that you and I refer to as "inflation."
However, in the Aug. 21 Private Briefing, Martin completely dismissed this Pollyanna point of view. There is inflation, he said. In fact, it's staring us right in the face - as a soaring stock market.
According to Martin, the "Real Dow" should be much lower.
Another Stock Market Bubble
With so much economic uncertainty - read that to mean, so much "risk" - there's no way stocks should be zooming like this, Martin said. The fact that they are is proof of a cheap-money-fueled "asset bubble" - a form of inflation, he explained.
The Permanent Wealth Investor editor also predicted that U.S. stock prices would continue their advance - especially if the U.S. Federal Reserve appeared willing to add additional stimulus.
And as the MarketWatch.com bulletin illustrated, that's precisely what happened.
Here's the thing: Now that "QE Forever" has arrived, this inflationary surge is about to get much, much worse.
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