Friday, June 1, 2012

Market Drops over 1100 Points in the Span of a Month


In the last month, the Dow Jones Industrial Average has fallen by leaps and bounds.  On 05/02/2012, the Dow Jones closed at 13,268.  Today, on 06/01/2012, slightly after the opening bell, the Dow Jones is at 12,165, which is over a 1,100 point drop. 

Disappointing job data was released today, accelerating our unemployment rate to 8.2%.  New employees hired in the US (nonfarm jobs) came in over 80,000 jobs short of economist projections.  From a housing standpoint, nationwide home values continue to suffer.  It was released this week that 26% of all home sales in the US were foreclosed properties, which are almost always purchased at significant price deductions.  The deteriorating economy has caused the 15 year fixed mortgage to dip below 3%, making this the lowest 15 year fixed rate of all time.  US Growth also decreased.  The first quarter US growth rate dropped to 1.9%, down from a projected growth of 2.2%.  At the end of the 4th quarter of 2011, the growth rate was at 3%.  Unfortunately, this trend is likely to continue. 

Internationally, the Euro nations continue to suffer.  Greece polls suggest that the majority of the citizens favor anti-bailout measures, which is a change from the previous week.   The fear of Greece abandoning the Euro is, now more than ever, becoming a harsh reality.   The combined unemployment of the Euro nations is at a record high of 11%.  Furthermore, Spain is facing a banking crisis.  Earlier this week the European Central Bank (ECB) denied one of Spain’s main banks a bailout of over 19 billion dollars (US dollars).  Over the next couple of weeks I feel Spain’s financial woes will take up more of the spotlight.     

Most experts believe that volatility will continue forward.  Because of this, investors are fleeing to US Treasuries, which has caused a back to back record low for the 10 year US treasury bonds to fall below 1.656%.  This surge to US bonds has caused the strength of the US dollar to temporarily increase in value.  

No comments:

Post a Comment