The Dow Jones Industrial Average dipped below 10,000 Tuesday for the first time since February as a month of market volatility and price declines continued.
The zooming rebound in U.S. stock prices from their March 9, 2009 bottom - the strongest rebound since the Great Depression - has been stymied by concerns over the Eurozone debt contagion, financial reform, the market flash crash and new political sparks in Korea. Data shows that the bulls are still hanging around - on the sidelines - but the bears have been calling the shots during a month that has seen stock prices fall more than 8%.
"I think it's a question of pick your poison," Dan Alpert, managing partner at Westwood Capital, told MarketWatch. "The market was poised for a very severe correction and whether it's southern Mediterranean countries or worries about German banks, you can pick your catalyst."
[mm-toolbar]Stocks in Portugal, Italy and Ireland were down 20% from April highs, joining the bear markets of Spain and Greece. Last weekend's announcement that Spain's central bank would take over savings bank CajaSur contributed to uncertainty about the Eurozone's ability to bailout Greece while other countries struggle.
"In another environment it wouldn't have changed anything, but in this environment it is a reminder about problems of the financial sector and of Europe," said Lars Christensen, chief analyst at Danske Bank in Copenhagen.
Trouble in the Eurozone has pushed investors to take the "flight to safety" and turn to the U.S. dollar and bond market.
"There have been different phases in this crisis, when it was only Greece," Cyril Beuzit, head of interest rate strategy at BNP Paribas SA (OTC: BNPQY), told CNBC. "Ten-year U.S. yields were trading at 4%. Now the fears are wider, U.S. 10-year yields could break below 3% and we expect equities, currencies and commodities to remain very volatile."
Money Morning Contributing Writer Jon D. Markman pointed out Monday that 15 out of the previous 19 trading sessions posted 100-plus Dow point changes, as opposed to the 40 sessions from mid-February to mid-April that included only three days of 100-point changes.
But Markman says this daily instability is a sign of a greater recovery, as stocks that have climbed up will drop in value as they approach their medians.
"Now that we've seen a period of extra-low volatility in March and April followed by a period of extra-high volatility in May, the next stretch is likely to feature more normal volatility," said Markman.
The market's "fear gauge," the Chicago Board Options Exchange's volatility index (VIX), was down to 15.58 on April 12, but hit an intraday high of 43.74 on Tuesday.
As investors are paying more for safety and hedging their risk, we want to know what your moves have been...
That brings us to next week's Money Morning Question of the Week: How are you responding to the market volatility? Have you retreated to safer investments? Are you scooping up the "bargain" stocks that others have dumped? Going forward, are you more likely, or less likely, to buy stocks? What concerns or excites you about the market's recent roller-coaster ride?
Send your thoughts, questions and concerns to [email protected].
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We reserve the right to edit responses for length, grammar and clarity.
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