Will October 24th, 2008 Become "Black Friday"?
Will October 24th, 2008 enter the history books as "Black Friday"?
I always roll my eyes at people who proclaim that a certain day will end up being a "Black" anything, but today seems a bit different to me.
There is about an hour and a half to go until the opening bell, and the S&P 500 Futures and Dow futures are both limit down.
The wave of selling started overseas in Japan and Germany. Sony fell more than 14% after they slashed their earnings forecast, while Daimler reported lower Q3 earnings and threw out its guidance for the rest of the year. This led the Nikkei, DAX and FTSE to drops of around 10% for the day.
The Dow, after a sharply lower open, will be precariously close to the 8,000 mark. If the index falls below 8,000, there could be a sustained wave of panic-selling as investors completely abandon the markets and move to cash.
The worldwide investor community is also becoming increasingly worried about the dire financial predicaments that a number of major countries currently find themselves in. Countries such as Pakistan, Hungary and Belarus all find themselves negotiating with the International Monetary Fund for possible loans.
The main reason that we could see a potentially major sell-off on Friday is because we seem to be running out of bullets that will help to prop up investor sentiment. We've passed the bailout, we've had co-ordinated global interest rate cuts, we've had co-ordinated action on the part of governments worldwide to inject capital into banks - we've had a number of new initiatives undertaken, but are still about to break through to new lows. Will investors be able to hang in through all of this, or will the most hardened of long-term investors finally throw in the towel? New data is confirming what most people already knew - we are in the midst of a global recession that will eat into corporate profits.
The stock market crash of 1987 started with a wave of selling in Asia and Europe, and eventually spread into the United States with a vengeance.
I'm not saying that a major crash is necessarily coming today - I'm just saying that there are certainly a number of reasons as to why it could happen. Friday will be a very interesting and, potentially historic, day.
Filed under: The Economic Meltdown