I don’t know much about the stock market, but when I saw the news about yesterday historic plunge, it stirred a memory of them calling a time-out and halting trading for a bit, the last time the market took a steep, sudden dive. That was October 19th, 1987–Black Monday.
Am I right in thinking yesterday was worse? Why didn’t they call a halt to trading this time? Was that not an effective tactic?
Because the Black Monday plunge was something on the order of 20%. Yesterday’s hiccup was only about 6%.
Although the Dow dropped hundreds! of! points!, it was only like a 3% drop. In 1987, the drop was a lot more (over 20%?).
Because the Dow is over 10,000 these days, there’s an inflation to the numbers. Hundreds of points used to signify giant shifts, now they are just above random fluctuation.
Besides, a market correction is sometimes a good thing. If the govt is acquiring shares of failing companies, they can get them cheaper.
Very insightful. If only I had faith that there were folks in Washington capable of grasping this concept.
See, this is something I’m not sure I understand about the whole “bailout/rescue” thing…if the stock market is on a bubble right now, don’t those stock values HAVE to fall to attain any stability? If the bailout stabilizes the stock market for a couple of years at 10,000 plus, isn’t that just delaying an inevitable correction?
This goes for the housing market as well. The home prices that are through the roof are on the bubble. The only way to stabilize anything is to let the houses valuate to the correct level instead of the level subsidized by the bubble, right?
I have sympathy for all of those people who just saw their retirements get delayed five or ten years. But wasn’t a bubble pop on both the housing and stock markets inevitable? We could have delayed it a few years, but it would have had to happen eventually, correct?
(Besides, isn’t it a fact that all of those folks only actually lose money if they sell? Because the stock market, in general, can recover those points over time?)
I was under the impression trading was halted before ('87) because computerized selling programs had kicked in and had resulted in a sell off well beyond what would be considered reasonable even in a panic. Yesterday’s plunge was a rational, corrective reaction, not an out of control, code driven freefall.
The SEC has circuit breakers set for 10, 20 and 30%. Yesterday’s fall was what, 7%?
To add to this (I didn’t see this in the link but heard it on the news last night) – at 10% they suspend trading for an hour. I don’t recall if they said what happens at 20%. At 30% they suspend trading for the rest of the day.
The bailout has nothing to do with the stock market. The bailout is to keep lenders alive so that credit remains available in the economy. The entire economy runs on loans. If nobody is making loans, then no business can operate. It’s the non-operating business future that the stock market is responding to.
Again, the bailout is to keep credit flowing, not to keep housing prices up. The housing bubble is already correcting itself. It still has nothing to do with the bailout.
WHICH IS NOT A BAILOUT! It is a combination of loan guarantees and equity stakes. A bailout is a handout. Of course people are upset about a bailout, so it would be really helpful if everybody, especially including the media, would stop calling it that.
The housing bubble, yes. There was no stock bubble.
Yes, in general. That means nothing in the specific. The stock market stayed flat for the entire decade of the 60s. That was before half of American families had most of their money in 401K, pension plans, and other investment accounts that are mostly n the stock market. With the core of the baby boomers reaching retirement age and hoping to draw on those accounts, eventually gaining value is of little use to them. The market has stayed flat now since 1999. How much longer can it do so without serious long-term repercussions?
A 20% fall triggers a 2 hour stop when it occurs between 9:00 and 1:00, a 1 hour halt if between 1:00 and 2:00 and the market closes if after 2:00. This schedule is for NYSE averages as of Q3, 2008.
What kind of logic determines this schedule? Why are there different actions at different times?
The NYSE is generally open between 9:30 and 4. The different delays are probably just because it’s not worth reopening the market for an hour.