S&P 500 Index Down 45% in 2008

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Want to know just how bad things are right now?

I came across some interesting data earlier today that illustrates just how historically weak the major market indexes are right now.

Most people know that the S&P 500 is down around 45% so far this year. However, when you examine the stocks that make up the S&P 500, you start to get an idea of just how bad the carnage is.

First off - what is the S&P 500? According to Wikipedia:

"The S&P 500 is a value weighted index published since 1957 of the prices of 500 large cap common stocks actively traded in the United States."

The S&P 500 contains many stocks that are likely well-known to you - Starbucks, Yahoo, General Motors, etc.

Well, Reuters published an article earlier today that stated that of the 500 stocks in the S&P 500, a full 101 are trading below $10 per share.

Also:

-of the 500 companies in the S&P 500, only FIVE were trading above $100 per share
-186 stocks of the index don't even qualify to be in the S&P 500 anymore, based on minimum market cap levels
-5% of the entire index has a market cap of less than $1 billion dollars

These are incredible numbers, and illustrates just how bad things are. These aren't penny stocks - these are some of the biggest and best publicly traded companies in the United States.

Want to know how bad things are from a historical perspective?

After the dot-com bubble popped and 9/11 took place, 59 companies traded at a value of less than $10 per share (October 2001). We are currently doubling that mark.

After the stock market meltdown in October of 1987, only 35 stocks in the S&P 500 were trading at less than $10 per share. We are currently tripling that mark.

Experts contend that we would likely have to travel back to the 1940s to find an era as weak as this one right now, in terms of stocks that are trading at less than $10.

Some of the S&P 500 stocks that are trading for less than $10 include:

Yahoo!, Starbucks, General Motors, Ford, Motorola and Citigroup

These are big, big companies that are currently in a world of hurt.

I am not sure how the S&P plans on dealing with this situation - are they going to delist almost 200 companies at once? Could they find 200 companies to take their spots? Or will they issue a moratorium on delistings, similar to what the Nasdaq did?

Not only does this illustrate just how bad things are right now, but it also spells trouble for many of the companies that have been affected. Many people will not invest in companies that are trading in the single digits. They are seen to be one step away from "penny stocks", and many people won't touch single digit stocks with a ten foot pole. Also, some bond contracts require that companies must trade above the $10 per share mark.

This has obviously been a horrific year for the S&P 500 and practically every other major stock market index in the world.

The question is - how much worse will things get before they start to improve? That's the $64,000 question right now.

Source: Reuters - Over 100 Blue Chips Now Selling for Less Than $10 Per Share
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Filed under: The Economic Meltdown |