Posted by Jack Lee
But, shares of Smith and Wesson jumped!
The US Stock market was rocked today by a horrific drop of nearly 504.48 on the big board or 4.42% which is the largest drop in the market since September 11th, 2001.
To say this day was ugly is an understatement! The S&P 500 closed at its lowest level since 2005 and is now down 18.8% year-to-date and down 24.3% from its October 2007 all-time high. The financial sector (-10.4%) took the brunt of the selling interest, although weakness was broad-based with all ten economic sectors posting a loss. Decliners outpaced advancers by a whopping 81-to-1 ratio on the NYSE.
Is this the begining of the end for the worst self-caused financial disaster in US history or merely end of the begining with worse yet to come? A sentiment poll for the stock market said the worst is yet to come… by a wide margin. The one bright spot in the financial sector was Merrill Lynch, MER gained 14.78% by selling itself to Bank of America. Bank of America on the other hand lost a whopping 18% of it’s value today.
If Lehman goes under as it appears it will, this will shake the stock market and especially the financial sector worse than a 7.0 earthquake. The financial stocks left standing will only be the very best like J.P. Morgan and Goldman Sach’s. JP lost 7.25% of it’s value today. What you have to remember is when large companies like Bear Stearns, Lehman Bros., etc., go under tens of thousands of jobs go with them, good paying jobs, and this sets up a ripple effect that is felt in government revenues and throughout the private sector economy. Unemployment was already on the rise and California was among the highest unemployment rates at 7.3% and now this, so if you thought the California economy was bad this year, wait till next year.
Why did the government step in to help FNM and FRE and not LEH? Clue: The Chinese own huge amounts of sub-prime mortgages. If they suddenly divested it would be on par with a sell down in real estate not seen since 1929. The White House was gripped by fear when they rushed to nationalize FNE and FRE. Only history will tell if this was the right move, but to many of us who still believe in the free market system, it already looks bad…very bad. And government will only make it worse.
Stocks in Smith and Wesson were up 12.39%…. an ominus sign.
BIG STOCKS IN THE RED:
1 AIG 5.45 -6.69 -55.11%
2. LEH 0.193 -3.457 -94.71%
3. C 15.58 -2.38 -13.25%
4. WB 11.13 -3.14 -22.00%
5. FRE 0.400 -0.060 -13.04%
6. FNM 0.616 -0.124 -16.76%
7. ABK 6.53 -0.98 -13.05%
8. LVLT 3.04 -0.40 -11.63%
9. GS 135.81 – 18%
10. MS 32.57 -4.66 -12.52%
After hours trading offered little relief to the devastated financial sector.