-Caveat Lector-
Begin forwarded message:
From: [EMAIL PROTECTED]
Date: August 3, 2007 9:25:34 PM PDT
To: [EMAIL PROTECTED]
Cc: [EMAIL PROTECTED], [EMAIL PROTECTED], [EMAIL PROTECTED]
Subject: The Big Bear
Stocks Fall Sharply Amid Credit Fears
By TIM PARADIS
The Associated Press
Friday, August 3, 2007; 10:48 PM
http://www.washingtonpost.com/wp-dyn/content/linkset/2006/06/01/
LI2006060100693.html
NEW YORK -- Wall Street plunged anew Friday, hurtling the Dow Jones
industrial average down more than 280 points after comments from a
major investment bank exacerbated the market's fears of a widening
credit crunch.
The drop of more than 2 percent in major stock market indexes was a
fitting end to two volatile weeks on Wall Street ... This time, the
catalyst for a sharp skid was Bear Stearns Cos. Chief Financial
Officer Sam Molinaro, who described turmoil in the credit market as
the worst he'd seen in 22 years
<snip>
The Dow, which on July 19 closed above 14,000 for the first time,
now sits about 819 points below that level. That 5.9 percent
decline puts the Dow more than halfway toward the technical
threshold of a correction, which is 10 percent.
----------------
TERMS
A market correction is defined as a drop of at least 10%, but not
more than 20% (25% on intraday trading) in a short period of time.
The major difference between a bear market and a correction is
magnitude and duration. Bear markets last much longer and the
magnitude of loss is greater.
An exaggerated bull market fueled by overconfidence and/or
speculation can lead to a stock market bubble, inflating values.
At the other extreme, an exaggerated bear market, which tends to be
associated with falling investor confidence and panic selling, can
lead to a stock market crash and a recession.
The most famous crash in 1929, (known as Black Thursday) when the
Dow dropped 50%, preceded the Great Depression. The succeeding
years saw the Dow drop a total of over 85%.
There was also a crash or "adjustment" on Monday October 19, 1987,
known in financial circles as Black Monday, when the Dow Jones
Industrial Average lost 22% of its value in one day, bringing to an
end a five-year bull run. Black Monday was the greatest single-day
loss that Wall Street had ever suffered in continuous trading up to
that point. Between the start of trading on October 14th to the
close on October 19, the DJIA lost 760 points, a decline of over 31
percent.
Despite fears of a repeat of the 1930s Depression, the market
rallied immediately after the crash, posting a record one-day gain
of 102.27 the next day and 186.64 points two days after. It took
two years for the Dow to recover -- by Sept. 1989, the market had
regained all of the value it had lost in the 1987 crash.
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