A 10% stock market drop? In three days, we're already halfway there
Ugly, uglier and even uglier. There you have the stock market’s last three days.
The Dow Jones industrial average closed down 216.90 points, or 2.1%, to 10,172.98 today, bringing the decline from Tuesday’s 15-month high to nearly 5.2%.
The broader Standard & Poor’s 500 index slid 2.2% today, after losing 1.9% on Thursday and 1.1% on Wednesday. The three-day drop: 5.1%.
In short order, we’re already halfway to the minimum 10% “correction” that has been predicted repeatedly since spring but never materialized.
If this sell-off seems faster than the other infrequent pullbacks of the last 10 months, your instincts are right on: This is the biggest three-day slide in the S&P since the three days ending last March 9 -- which marked the bear-market low.This time around, of course, the market doesn’t feel like it’s at a major bottoming point.
Back in March, the onus was on the bears to show why things should get worse, with stock prices already at 12-year lows. Now, the challenge to the bulls is to show why things should get better, with prices still up more than 60% from the March lows.
The bullish case is under attack on all sides: The latest data on the U.S. economy has been mixed, at best; China is making more noise about slowing its economy; Greece’s fiscal nightmare is threatening another European financial crisis; fourth-quarter corporate earnings reports are beating analysts’ expectations (as usual) but clearly haven’t matched some investors’ loftier hopes; Federal Reserve Chairman Ben S. Bernanke’s reappointment may be in trouble; and President Obama has declared all-out war on the big banks -- which may play well on Main Street, but to Wall Street sounds like all-out war on capitalism in general.
Most important, perhaps, is that investors who’ve been riding the 10-month-old rally, and who haven’t sold anything along the way, now have plenty of excuses to take money off the table. So they are.
The market also is reminding everyone that it, too, is subject to the laws of gravity: Going up often is a hard slog; coming down is easy.
Make sure your seat belt is securely fastened.
-- Tom Petruno
Photo: On the NYSE floor. Credit: Richard Drew / Associated Press