Recession Rocks the US as Thursday’s Stock Plunge while still the Dollar Soars
Fears about the recession and the Federal Reserve Bank statements must have been brewing Wednesday night as Thursday’s stocks was a nightmare. Investors went on a selling binge that rocked the US stock market world. At one point in the session, the Dow Jones Index was down by 528 points. Against the other world currencies such as the Pound, the Euro and others, the dollar took flight as investors decided that the US currency was a sure safe-haven for their money.
So, what freaked out the investors on Wednesday?
In most probability, the statement issued by the Federal reserve. It warned of
significant downside risks, including strains in global financial markets.
It then embarked in a plan to buy $400 billion worth of bonds over 3 to 6 years in a strategy to stimulate the flailing US market. This did nothing to resuscitate the stock market as investors continued to sell all across the board.
In effect, the Federal reserve plans to exchange their short term government securities for long ones that would mature in 3 years or less, then it would take the dividends and proceeds from the maturing securities and buy more securities, but those which have a mortgage backing. Great plan – the Dow sank 284 points straight after that statement.
Qouting Giles Watts, head of equities at City Index, The sell-off was driven by
the sheer weight of evidence pointing towards a sharp slowdown in global activity
, which led the likely-hood of a new recession. He continued to question whether investors were asking themselves about whether risky stocks or defensive safe havens were better places for their stock.
The only Dow companies that had gains on Thursday’s stock market were – Nobody. Even Apple (AAPL) had losses.
The stock market losses
Also Commodities fell due to fears of slowdown in the economy
If you divided the New York Stock market into 2 football teams of winners and losers, you would have 2,724 losers and 343 winners. Who would want to place bets against those odds?
According to Louise Cooper, markets analyst at BGC Partners,
The future is so uncertain – the world could look significantly different in a month’s time. Greece could have defaulted, we could be in the middle of a banking crisis – a bank could have even gone bust,
referring to the fear that investors were harbouring.
The Board of Governors define the Federal Reserve as independent within government in that
its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government.
And I ask you, is that much power to be without directly influencing policy and world markets?
Friday – the weeks end – better news
At the end of the week there was some better news as the stock market pulled itself together with the first gain of the week. Though, not exactly a massive gain, investors tried to recover their position after four days of rampant selling. The dollar is still soaring.