The 1,000 Point Week
Dow's Losses Pile Up to 1,000 PointsIn trading last week, the Dow plunged over 1,000 points to levels we haven't seen since last October's huge selloff. The drop was caused by a handful of factors, including uncertainty over whether or not the Fed will act next month. The Dow's losses were accompanied by huge drops in the other two major indices, as well as falling markets worldwide.
The reason behind this latest drop is complicated, but world markets have been down big all week. The Dow held strong for the first part of the week, but by Wednesday it was hemorrhaging money.
Just about the only people who managed to make any money were short-sellers leveraging this latest downturn. The market lost money across every sector, and nothing was safe from the huge selloff. It was the same story worldwide, as global markets nearly all posted losses this week. That's a big indicator that the latest drop wasn't just caused by fears over the Fed taking action.
China's currency manipulation figured into this latest round of losses, as well as the plunging price of a barrel of crude oil. Those factors alone would be enough to spark a major selloff, but when you throw potential Fed action into the mix -- especially when it's been years since they acted last -- the combination is a volatile one.
I believe it's the combination of those three factors that caused the market to drop this week. Each factor alone would have been enough to cause an off week. But all of them combined led to losses of over 1,000 points.
Oil's Terrible WeekThe price of oil plunged this week, falling another $4 per barrel over the course of the last 5 days. Prices even broke through the $40 support point in intraday trading on Friday. The price of oil is tied together with both politics and production, and it has interesting ramifications on the world stage.
The falling price of oil is set to be a thorn in Iran's side, assuming sanctions get lifted sooner rather than later. Right now, even established oil producers are having a tough time making a profit with these prices. Unleashing a torrent of Iranian oil on the market would only drive prices down further, since the problem driving down oil prices is a supply glut.
All of that could mean that Iran can't count on the same sort of influx of cash that it could have 6 months ago, when prices were higher. That may mean that the country has to put off some vital oil infrastructure upgrades, and it could slow down their economic recovery. More importantly for investors, it could also drive the price of oil downward even further.
Tech Takes One on the ChinStocks from every sector and segment were down on Friday, but the tech sector was hit especially hard. Some of the biggest names in technology got hit hard by the downturn, including Apple (AAPL) and Facebook (FB), and Microsoft (MSFT). All three companies lost around 5% of their value when the markets fell by a little over 3% on Friday. That points to a fragile sector, and one that is more sensitive than others to the whims of the day-to-day market.
One of the stocks that led the charge to the bottom was Intuit (INTU), a software company that makes a popular accounting program. Intuit lost over 12% of its value on Friday, and led the tech sector in losses. Not only was Intuit being pushed down by larger market forces, it also suffered from a downgrade that had some investors selling off stock as fast as possible.
Published on Aug 24, 2015By Aaron Phillips