It’s bad for stocks, but it’s not March (yet) or a bear (yet)
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Bad as it feels today in the stock market, it’s not yet as grim a situation as Wall Street faced in mid-March -- at least, if you use any major index but the Dow Jones industrials as your yardstick.
I’m not trying to minimize the situation, just point out some facts, such as they are.
The Dow now has plunged through its March 10 closing low of 11,740.15, and was down 254.11 points, or 2.2%, to 11,557.72 at about 10:45 a.m. PDT. Blame the usual suspects: Another rise in oil prices, another drop in the dollar, and another batch of investors too depressed to keep holding GM, Citigroup, Boeing, etc.
But the Standard & Poor’s 500, down 2.2% to 1,292.36, would have to lose another 1.5% to take out its March 10 closing low of 1,273.37.
Some broader indexes have even larger cushions, relatively speaking. The New York Stock Exchange composite index, off 2.2% to 8,674.82, would have to drop another 2.1% to blow through its March low. And the technology-dominated Nasdaq composite would have to slump nearly 7% from its current level to hit a new low.
What’s more, even with this latest selloff, the Dow still isn’t in bear-market territory as it’s usually defined -- meaning a drop of at least 20% from the recent high.
The Dow is off 18.4% from its all-time closing high of 14,164.53 reached on Oct. 9, 2007. Measured from their respective highs last year, the S&P 500 is down 17.4% and the Nasdaq is down 18.4%.
So by Wall Street’s usual standards, we’re still just in a ‘correction’ within a bull market.
Do you feel better yet?
‘Techically it’s not a bear market, but that’s semantics,’ concedes Paul Hickey, co-founder of research firm Bespoke Investment Group in Harrison, N.Y. For most investors, he says, ‘It doesn’t feel like a bull market.’
Even so, he says that the overall reading he gets from 35 market indicators Bespoke tracks is that the stocks are ‘deeply oversold right now’ after four straight weeks of losses, meaning the market is more likely to bounce higher -- at least in the near term --- than keep sinking like a stone.