Freak Out Continues: Markets Close At Lowest Level Since 1997

Bad day on Wall Street today, folks. The S&P 500 closed at the lowest level since April 1997.

The NYT explains:

Analysts said that after fevered speculation last week about bank nationalization, many investors now expect the government to move in that direction, despite statements from the White House supporting a privately held banking system. Stock markets dropped on Friday amid concerns that a broad government takeover could wipe out financial shareholders.

Now, with the government set to begin the “stress tests” on Wednesday, investors want to know which banks will be deemed healthy and which will not, analysts said. Of most pressing concern are big banks including Citigroup, Bank of America, Wells Fargo and JPMorgan Chase, followed by regional chains.

Those stress tests, meant to identify the banks that require government help, seem to be adding stress to the markets.

Fortune says:

Testing big U.S. financial firms seems like a good idea. But bank stocks, which were already hit hard before Geithner revealed the plan last week, have only been under renewed pressure as investors have been taking bets on which banks might fail stress tests – and possibly be forced to sell more stock to the government, further diluting shareholders.

Bank stress tests cause more stress [Fortune]
Stocks Slump on Corporate Woes; Indexes Fall by 3.4% [NYT]

Comments

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  1. johnfrombrooklyn says:

    This is all being driven by forced redemptions. Sooner or later people will realize they have to save for retirement, that 1% savings accounts won’t get them there, and the market will start to climb back up. In the meantime, hold on for your life.

    • orlo says:

      @johnfrombrooklyn: Just because you need money for retirement doesn’t mean that you can create it through magic. And housing prices still haven’t dropped enough for people to even have any money to invest.

    • LJKelley says:

      @johnfrombrooklyn: Idiotic thinking, exactly the same kind of thinking that go us into this mess.

      People claimed one would always need housing and such due to larger population house prices would always go up. People just wouldn’t stop buying houses.

      I’m sorry but bonds and other less risky investments are looking better and better. I mean you could save until your 65 and them bam have a market crash that wipes out half your savings. In fact you might have been better if you had just kept in a 1% savings account.

  2. Plates says:

    Thanks Obama!

    • Nathan Yost says:

      @Plates:
      Dude, you been living under a rock or something? Obama’s been in office for 30 days. This crap’s been going on for years. Get a clue.

      • MostlyHarmless says:

        @Nathan Yost: Not to mention the “markets tanked the moment he signed the bill” fallacy. The bill being implemented became a certainty when the Senate passed it on thursday night. They had 5 days after that to react to it, till he signed on tuesday.

    • Dave J. says:

      @Plates: Blaming Obama for this is the equivalent of going to the circus and blaming the guy with the huge shovel for all the elephant shit in the ring.

      • bohemian says:

        @Dave J.: That is the best description of this mess I have heard. lol.

      • Con Seannery gives up on subtlety, BAN FACEBOOKERS! says:

        @Dave J.: But when the elephant has left the ring and the shit continues to pour in, the shovel man has to have some bit of responsibility when his shovel is really about to be used to smack the heads off of the animal trainers and take control of the entire circus and centralize that under the guise of cleaning up the shit.

        • Trai_Dep says:

          @Con Seannery gives up on subtlety, BAN FACEBOOKERS!: Until the elephant trainers sneak back in, wearing scary clown makeup disguises, kneecap the shovel man then replace his shovel with a teaspoon, rape the elephant then splash the audience with gasoline then set them on fire – something to do with Free Markets and Social Darwinism.
          And eat the few remaining children who managed to escape the conflagration. Raw.

          • Con Seannery gives up on subtlety, BAN FACEBOOKERS! says:

            @Trai_Dep: To which the shovel man grins as his illusion worked, because the elephant trainers don’t have enough numbers to stop the shovel men of the circus, who have a mastery of words that can lull people into not questioning their actions as they take the teaspoon and scoop more shit into the…okay, can we drop the metaphors?

            Obama is a master orator who is convincing the people not to question him and marginalizing opposition as partisan BS while he passes ineffective “stimulus packages” that serve to promote socialism. After nationalizing all of the financial institutions and thus owning all of the homes, he moves to nationalizing healthcare and then other sectors of private industry. By the end of his time in office we’ll all pay our paychecks from our government jobs to the government collectors on the way to our government cars going to our government homes after picking up our government prescriptions we got from our government doctors and sitting on our government couches watching government programming on our government TV eating government food out of a government fridge in the USSA.

    • Ubik2501 says:

      @Plates: Thanks for the worthless no-content inflammatory post!

    • everfade says:

      @Plates: Try again.

    • Trai_Dep says:

      @Plates: Such is the best “wisdom” of what Republicans have to offer after destroying this nation.
      Thanks, Plates!

    • Jim Topoleski says:

      @Plates: Why are you still even allowed to post here and not banned yet? You post only to knock Obama with no evidence to back it up then disappear.

    • Barney_The Plug_ Frank says:

      @Plates: Just wait, Obama is just getting started. The One World Government takeover is now under way! It first starts with the control of the financial and monetary systems, then our hearts and minds.

    • backbroken says:

      @Plates: INTERNET RULE 1.0: DON’T FEED THE TROLLS

    • chauncy that billups says:

      @Plates: As much as I think a lot of the current sell-off has to do with this disastrous “stimulus plan”, the Geithner “rescue plan” debacle, the “force taxpayers to help pay for other peoples’ mortgages and help judges break contract law plan”, and Obama’s unremittingly snide and pessimistic rhetoric, I will wait until at least 2011 before I say ‘thanks Obama’ with sarcasm. Right now I just want this to stop.

  3. MostlyHarmless says:

    im buying stocks as soon as my next paycheck comes in. Anyone know a good service to use?

    • legwork says:

      @Lucifer_Cat: If you have to wait for your next paycheck, buying stock with it may not be the best course of action.

      • MostlyHarmless says:

        @legwork: LOL i thought it might come off as that. I kind of sort of have OCD, i like my budget numbers to look symmetric.

        I always planned to get into stocks at the end of Feb. Looks like the timing is going to be just right :P

        • MaytagRepairman says:

          @Lucifer_Cat: I am a big advocate of “dollar cost averaging”. That simply means you put in a little each time (e.g. use your employer’s 401k plan, also many mutual fund companies will allow you to schedule regular withdrawals from your checking account). The idea is you don’t know where the exact bottoms and tops in the market are so buy a little at a time over a long period of time.

          I recommend using a mutual fund that invests in stocks and not buying individual stocks through a brokerage account unless you have taken the time to learn what you are doing. It is called “diversification”. An average individual can only afford stocks from a few companies. If one of those companies goes belly-up it really hurts. When you buy a mutual fund you get a portfolio of usually hundreds of companies.

          Hope that helps.

          • MostlyHarmless says:

            @MaytagRepairman: I sure do appreciate the help. I was thinking of a low cost index fund. [TBH though, i wouldnt mind buying a little bit of MS or GE]

          • Blueskylaw says:

            @MaytagRepairman:

            Dollar cost averaging is opium for the masses.

            All you really need to know to see the fallacy of this claim is that the market tends to move up over time – i.e. it has a positive expected return. Therefore, the faster you put your money in the faster it’s going to grow. So, if you’re sitting on a pile of money the smartest strategy is actually to invest it all as soon as possible in one big lump sum. Sure, it may go down shortly after you invest but it’s just as likely to go up. End of discussion.

            Mathematical Illusion: Why Dollar-Cost Averaging Does Not Work,
            [www.fpanet.org]

            • MaytagRepairman says:

              @Blueskylaw: Your comments are directed at someone sitting on a pile of cash and investing for the long haul but doesn’t fit well for the context of this thread. Lucifer Cat is not sitting on a pile of cash — Lucifer Cat has to wait for a paycheck to invest. That points in the direction of dollar cost averaging.

      • bohemian says:

        @legwork: When you can actually get in on the action for small expendable amounts of cash it isn’t that bad of an idea. As long as it is money your willing to lose potentially. Wall Street has proven they are little more than sanctioned gambling anyways.

        I seriously considered buying some GM stock when it fell through the floor. I still might. Someone talked me out of buying Harley Davidson stock when they went public and shares were fairly cheap because it was a “bad idea”. Sometimes that conventional wisdom is total shit.

    • bohemian says:

      @Lucifer_Cat: Someone mentioned Ameritrade when I asked the same question. They have low or no minimums and low fees. I have no clue about their solvency as a business so I can speak to that yet. They were the best looking option for really small investing if your trying to pick up some bargains with a small amount of money.
      [www.tdameritrade.com]

    • Chongo says:

      @Lucifer_Cat: I like Sharebuilder.com mixed with a high interest (yeah right, high… laugh) savings account through ING. Since they are the same company you can instantly transfer money into your stock portfolio if something looks good to buy. Otherwise you have to wait 24 hours for the funds to clear.

      go through google and type in both “ING Direct coupon code” and “Sharebuilder Coupon code” to get some free money for signing up. I got 25 bucks for ING and 50 for Sharebuilder (after a few weeks of course).

      BTW I just got into the market too and while I wish I would of waited til this week, I still am only down a couple hundred bucks from buying a couple months ago. I’m betting more on the long term. Look into Alcoa!

      • failurate says:

        @Chongo: I got the $50 for signing up for and making a buy on Sharebuilder… and then promptly lost… I mean invested it in Toyota stock.

    • doodaddy says:

      @Lucifer_Cat: Lucifer, this isn’t necessarily the bottom. And even if it is, you may have a few years of sitting at this bottom before it starts an assent.

      • MostlyHarmless says:

        @doodaddy: I dont think it will take a few Years, maybe several months. Also, im not going to go all in. It will be a monthly plan of some sort.

    • FunkmasterC says:

      @Lucifer_Cat: I’m throwing a lot of my money into JNK.

    • adamczar says:

      @Lucifer_Cat: Scottrade is $7 per trade, but you have to have a minimum of $500. I use Sharebuilder, which has no minimums but costs $9.95 a trade.

      I just bought up 650 shares of SiriusXM the other day and might put in more if it goes down further. I understand this is essentially gambling but I really don’t see the company ever going away. I’m in it for the long haul, though, it’ll take years for them to turn around.

    • Myownheroine says:

      @Lucifer_Cat:

      If you make less than 100K/year or so, I’d open up a Roth IRA to stick your money in, assuming that you’re looking to keep this money invest for quite some time. You should google Roth IRAs. Basically, if you invest now with after-tax money, that money can grow tax-free. So if you invest 1K now and it grows to 10K in the future, you can withdraw the whole 10K without paying taxes on it. And it can double as an emergency fund, since you can take however much you’ve contributed out of a Roth w/o penalty at any time.

      If you’ve got at least 3K, I would go with Vanguard and get in on one of their index funds. I like their Target Retirement funds, which change and become more conservative as your goal date gets closer automatically.

      If you don’t have that much and want to do one lump sum, I would go with either sharebuilder or firstrade.

      If you don’t have 3K and still want a target retirement fund, I would open one at T Rowe Price: I know you can open with nothing as long as you contribute $50/month. I think they also offer just an S&P 500 index fund.

      • MostlyHarmless says:

        @Myownheroine: I suppose at this point the Roth IRA would make more sense. My initial plan was to do Roth IRA > Ladder some CDs > Index Funds > Stocks.

        Just got a bit tempted with all the super low prices :P

        And theyre up again today :/

        @MaytagRepairman: True, but I am not in as Dire Straits as it appears to be :P
        I typically save about 1K every month, which I divide into 2/3 parts. One of them is to go towards the investment, and the other towards the “down payment for the new car” fund. In case of extra savings, I put that away for “spend on that special someone when you find one” fund.

        • Myownheroine says:

          @Lucifer_Cat:

          I suppose at this point the Roth IRA would make more sense. My initial plan was to do Roth IRA > Ladder some CDs > Index Funds > Stocks.

          I don’t get the “>” symbol.

          I think you should buy stocks (well, assuming you’re going to be holding them for a long time). It’s a fantastic time to buy stocks. But you can buy stocks in a Roth IRA. You can put index funds in a Roth IRA. You can put CDs in a Roth IRA (I’m pretty sure you can do this. You certainly can put it in a money-market fund in a Roth).
          The Roth IRA is just the “container,” so to speak, like a safety deposit box you can put anything in. Throw your cash in, throw your index funds in, throw your stocks in. I have mutual funds, an ETF, and a small bit of a money market fund in my Roth. I’m considering buy a little bit of an individual stock in my Roth as well.

          But if I were you, I’d probably lower the whole “spend on that special someone when you find one” fund. Sheesh. That’s a lot of money for that. Put that toward a house fund or an emergency fund or at least an “I’m my special someone” fund.

          • MostlyHarmless says:

            @Myownheroine: Sorry for the late reply. And the obtuse symbol. I used it to mean “then”

            “IRA > CDs…” means “First invest in IRA, then with left over cash, spill it into CDs, once you have a reasonable CD ladder going, invest in index funds… ” and so on.

    • henrytimm01 says:

      @Lucifer_Cat:
      [online-stock-trading-review.toptenreviews.com] has a good comparison chart of some of the major ones out there. I heard Zecco.com was decent.

  4. concordia says:

    LOL Skifree?

    Consumerist, you’re the bestest.

  5. SexCpotatoes says:

    Lucifer_Cat: My buddy uses ScottTrade…

    JohnfromBrooklyn: The largest problem with your hypothesis there is what money exactly are people going to invest? They are up to their roofs in debt. They are fearful for their jobs… They don’t have much ability to save if they don’t have much cash coming in over and above what pays the bills. The $50,000 brokerage accounts have now plummetted to $1000. How do you propose they gain that value back? Praying?

    People will probably start to save what they can, but it will not go into the market right away, because you have to have 10,000$ just to try to get in on a decent index fund without a shitload of fees. Any recovery will be very slo-o-o-o-ow.

    • ludwigk says:

      @SexCpotatoes: Vanguard funds lowered their entry amount to $2500 from $3000, possibly because everything is so worthless right now.

      But it’s still hard to buy multi-thousand dollar chunks of things, only to watch the market move to ever-increasingly historically low levels.

  6. Streyeder says:

    I wish the gov’t would STOP even THINKING about doing anything and just put out a hard-line: That’s it. We’re done. Sort it out yourselves.

    All this wishy-washy allowing for speculation about the gov’t next step is killing ANY chance of recovery. Ugh…

    • ARP says:

      @Streyeder: I agreed, either nationalize or don’t. Both options suck, but at least there’s certainity. The market can respond to just about any event but uncertainity.

  7. hipersons says:

    Glad I waited for the sale to deepen to put more in my Roth. Score!

  8. jscott73 says:

    So after today we raced to position number 2 in the top 10 worst crashes since 1900…champagne anyone?

    [leatherheadblog.com]

  9. Anonymous says:

    Of course, 1997 is when I started investing in my 401K. With employer matching, I’ve lost about 4% per year since then, (but I’ve saved on taxes). Also, when (and if) the market goes back up before I retire, because I’m continually buying, the value of my 401K should shoot up quickly.

  10. Kevitivity says:

    This is a ringing endorsement for the BO stimulus plan.

  11. savdavid says:

    Excuse me, the stimulus plan hasn’t even been put into use, much less given time to work even if it had, Kevitivity.

    • Plates says:

      @savdavid: The stimulus plan isn’t going to work and was never intended to stimulate anything but pork and the wallets of the chosen few.

    • skipjack says:

      @savdavid:

      Ah..but the market reacts to how it thinks the stimulus will help/hurt businesses in general.

      It’s how the stock market works…it goes off of all past and current information…and projects how the future might be. Based on all that information, institutional and private traders either bull or bear the market. That’s why you see it down, and that’s how the legislative and executive branch have influenced the market. Traders know the stimulus has little to know chance of pulling us out of a recession.

      • Trai_Dep says:

        @skipjack: Versus, donno, being forced to nationalize our largest financial companies b/c of their malfeasance. That wouldn’t affect the Dow, at all.
        Also, the Street is very bad at horizons longer than one quarter, infamously so. Our economy is likely to be crippled by past mistakes far beyond that, so this is likely to impact the indexes for at least eighteen months.

        Of course “it’s the bailout” is sexier, simpler and fits within the media’s generally right-wing take on all things socioeconomic. But that doesn’t make it correct. :)

        • skipjack says:

          @Trai_Dep:

          Nationalization is the WRONG move. The companies need to eat their losses, the market needs to correct the problems and only then will recovery happen.

          The longer the government artificially props up certain markets..the more damage occurs to the national economic climate….or so history would show.

          • Trai_Dep says:

            @skipjack: Need to rip open their books in order to go all Resolution Trust on them. And the only way to do that is to (briefly) own them. I mean, they’ve more than adequately proved we can’t trust them.

            • skipjack says:

              @Trai_Dep:

              Sarbox was supposed to do that….but somehow it didn’t…..how can we trust the “gubmit” to do what they were supposed to do before now……when their books were supposed to be ripped open in the first place?

              • Trai_Dep says:

                @skipjack: Banks don’t want to mark-to-market their instruments since there’s an overly (perhaps) pessimistic value on them. The problem is that they don’t want to do what normal individuals or companies do when a margin call hits them: take their lumps when they cash them out at today’s value. They want an imaginary 6x multiple, on their say-so, so their shareholders don’t get hurt.
                Problem is, it’s a zero-sum game: the losses have to come out of either the shareholder’s, the bond-holder’s or the taxpayer’s pocket. If the first two parties don’t want to face the bracing refreshment of the market, take ‘em over, go over their books like only owners can, sell what we can for a decent price and write off the rest. Let’s not waste a decade, like Japan did. And like the Resolution Trust did. It worked, it provided finality that the markets require and life went on.
                Their irresponsibility created the situation, and they have to pay the consequences. Their screw-up is much larger than them, and it’s criminal they’re asking working Americans to buy their way out of it.

      • cabjf says:

        @skipjack: Which is why if the government would stop messing around, just put in their hyped up, “long overdue” regulation, and quit trying to force the recovery, the markets would stop having so much to react to. At least when non-government related information comes in it tends not to have such a drastic effect.

  12. primetime224 says:

    Is there any reason to assume we won’t end up with a situation similar to Japan, and this whole thing ends up taking 20 years to work itself out? I still think the market is to volatile to invest in, but I always have. My 346,000 is earning a safe 3% and I haven’t lost anything in this crash. Granted the market was giving 8% returns, my problem is few people seem to know the best time to pull out and not lose 50% in less then a year.

  13. azgirl says:

    How about a little protectionism here people? We need to bring jobs back to this country.. that is the only way back from this mess– we need to make things again. Pure and simple…

    • RedSonSuperDave says:

      @azgirl: As much as I’m against protectionism in general, it may have some bearing on our current situation. I recently lost my job working in a factory. Management came around showing everybody these flyers that told us where our job was going. Mine went to an Indonesian guy who made $2.13 an hour.

      We can’t compete with other countries’ labor costs when they have no such thing as “workplace safety regulations” or “child labor laws”. Nor should we try. I don’t see a problem with putting a tariff on goods that are manufactured in sub-U.S. working conditions to make them as expensive as goods manufactured in the US by workers who are old enough to drive, in conditions that won’t kill you by the age of 30.

      • MostlyHarmless says:

        @RedSonSuperDave: Even with workplace safety and child labor laws, the standard and cost of living in a lot of countries is lower. People are perfectly happy with not having cars or ACs. Even for people who do have those, they dont cost as much. On the other hand, some of the things we take for granted here are either too expensive or nonexistent there.

        I make more than my dad does in a month when you convert $ to Rs, but he still has a better standard of living than mine, because his priorities are different. Now the internet connection there sucks and the roads and traffic are scary.

        What I am saying is, that yeah, you are right, we cant compete with places with cheaper labor. And yes, most countries have cheaper labor. But thats not necessarily because of lax laws or child labor.

  14. Borax-Johnson says:

    I read on a blog that in the proposed “Stimulus II” which is due out in early July, the government will be wetting up a website that allows investors who have lost money in the markets to be able register and download a coupon for up to $3,976,510.08 in government money ($1,500 for married households) to offset losses in equities.

    For some odd reason, they capped the married bonus money at substantially less than for singles. I’m waiting for more details to emerge. I think I read the the US government is going to collect an income tax on the citizens of Lithuania to offset the costs to US taxpayers.

  15. primetime224 says:

    364,000 at 3% interest never hurt anybody.

  16. NigerianScammer says:

    Damn, only the Illuminati can save us now.

  17. Anonymous says:

    The reasons the market and banks is obvious. Pure greed that brought everything down. Simple and sure slide after the rape of the nation and small investors and homeowners.

  18. CumaeanSibyl says:

    The market just tanks for any old reason now, I think. Didn’t it crash when the bailout bill went through? And Wall Street had been begging for that. Can’t please these people.

  19. Barney_The Plug_ Frank says:

    Just wait, Obama is just getting started. The One World Government takeover is now under way! It first starts with the control of the financial and monetary systems, then our hearts and minds.

  20. Subsound says:

    When treasury securities go negative, which they have, you know people are running like chicken little. Worse is people exaggerating and saying “Oh my $50k in brokerages is down to $1k”…which is such an exaggeration it’s silly, unless you were stupid and invested in the riskiest things you could find. As for stocks…Hell yeah, I’m dumping as much money into stocks as I can afford. I know it will take a bit, but I’m 30 I can wait.

  21. pschroeter says:

    Lately it is beginning to feel to me like Wall Street is punishing us for not doing enough to help fix the house of cards they created in their greed.

    Fornicate all of them in the posterior.

  22. redclear55 says:

    balance sheet recession… interesting article.

    [www.npr.org]

  23. battra92 says:

    I have a 401K which is mostly stocks but honestly I’m thinking of having a more stable Roth IRA with a lot of it in CDs and such. I just don’t like the kind of risk and with obama is power, I don’t see things any better.

  24. cozynite says:

    The stock market seems to have bi-polar disorder or PMS. It/they wig out at anything now.