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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."
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 mailbag@moneymappress.com.
[Editor's Note: Is there a topic you want to see covered as a Question of the Week feature? Then let us know by e-mailing Money Morning at mailbag@moneymappress.com. Make sure to reference "question of the week suggestion" in the subject line.
We reserve the right to edit responses for length, grammar and clarity.
Thanks to everyone who took the time to participate – via e-mail or by posting their comments directly on the Money Morning Web site.]
News and Related Story Links:
- MarketWatch:
U.S. stocks retreat after global selloff
- Money Morning:
Will Extreme Volatility Actually Stabilize the Markets? - Money Morning:
What Really Caused the Stock Market 'Flash Crash' - Money Morning:
Investors See Caution Flags as Spain Bails Out Struggling Savings Banks
- CNBC:
Global Markets Now Infected With Europe Fear - Money Morning:
Why the Eurozone Debt Contagion is Telling Us That It's Time to Buy Dividend Stocks, REITS and MLPs
- Money Morning News Archive:
Question of the Week Feature
- Money Morning News Archive:
Financial Reform Stories
Greetings from Las Vegas, NV …
i am buying as much silver as I possibly can. I only wish I would have done this decades ago. One of my patients is a very sophisticated portfolio manager. I am not one of his clients. He said that silver drop to as low as 6-7 dollars before it'll take off as you have indicated. Regardless, I am buying junk silver here and there. I would really like to buy a few monster boxes!
What are your thoughts on Copper. i believe it is at about 3.30 per Lb.
Some folks are hoarding 1982 or earlier pennies with the thought that eventually – when the penny becomes extinct – it will be legal to melt 'em down into bars.
I would love to buy gold but my cash flow is such that I feel that silver – in the long run – might serve me just as well or better. Am I correct .
As a M.D. I know alot about a little. I am acutely aware of my lack of knowledge when it comes to the economical debacle and precious metals.
My IRA has essentially nothing in it.
I no longer trust the banks at all. I don't even have a checking account!!
Best regards …
Matt
greetings from Western Washington….
A little background first, before I explain my recent moves.
In July of 2008, I took all my stocks and sold since the market was giving me bad vibes. And then when the Market tanked, I jumped back in late Novemeber, January and March, buying Gold and Silver Mining, select Tech, Chinese Companies, and Financials and some energy related stocks. I sold most of my toys and vehicles, and with all savings bought up all the physical silver and gold I could get my hands on. Silver eagles, 90%, 40%, and well known rounds, and liberty head gold.
In April of this year I started selling off my stocks either to take some cream, or remove outright from the portfolio, and have added three short ETFs (SRS, SDS, SKF) which has done well already.
Half of my paychecks goes to buying gold Liberty Heads or 90% silver coins on market dips and whichever is valued the best, and every pay period buy 2 boxes of nickels. I am not sure when, but before the summer is out, I will be again 100% in cash.
I will continue buying Gold, Silver primarily, and build cash ready to strike at the next opportunity thats coming.
One other inflation fighting measure that I have been covering is purchasing durable goods which are mainly from overseas. I have one room converted to a store room where there are 3 to 5 years of goods. My daughters call it the General Store Another shed with hardware. As soon as the new crops are in I will be storing rice, grains, beans, for a 5 year supply. I have 20- 55 gallon food grade containers with water in the garage.
My half acre has been converted over to a homestead raising veggies, fruit, poultry and rabbits for consumption. This will be the first year all facets will be in place.
I have no credit cards, not debt and pay with cash. I still have a mortgage payment at 5.25 percent. There is a balance of approximately 20 percent of current value.
Just working overtime to get ready, as this could be the Perfect Storm.
I have been doing my own investing for sixty years. From March to March the SP raised some 60% while my investments were in a 125% raise. I have been using Dividend stocks and MLP stocks along with utilities and monopolies. These have helped stay ahead of the general market. My portfolio is made up of about thirteen stocks — about all I can keep a handle on and my dividend average is 7.2%. I am eighty four years of age and dividends are important to my being here. I have developed my own investment system and I find it is a good one most of the time.