Bad Week for the Stock Market
November 9th, 2007By: Stephen Bishop Jr.
To say this week has been shaky for the stock market would be a total understatement. On Wednesday the Dow Jones industrial average fell 360 points. Today was no better as the Dow fell another 223 points. The Standard & Poor’s index fell more than 21 points while the NASDAQ composite index saw a 68 point loss.
What’s going on?
As you know, the US is currently in a major credit crisis. The subprime mortgage market can be blamed for the majority. Falling house prices are leaving homeowners with mortgages that they cannot pay. In return, banks have continually seen drops in their subprime mortgage securities. Big banks are being forced to make tremendous write-downs due to their increasing loan losses. Wachovia, our nation’s fourth largest bank, is estimating a possible $600 million loan loss in this quarter alone. Unfortunately, Wachovia is not alone. Just to name a few, CitiGroup Inc. and Morgan Stanley made billion dollar write-downs this week as well.
Investors remain concerned that the credit crisis will not heal over night. To add to this, the price of oil is at a record high sending consumers’ energy bill through the roof. That’s not all that can happen due to the increase. Commercial airlines will raise ticket prices and your wallet will get hit hard at the gas station.
Overall, it is safe to say that the stock market is being hit from all angles. Stingy lenders are making credit very tough to come by, the housing market shows no sign of improvement for the fourth quarter, and oil prices are at an all-time high. Let’s hope we see improvement soon!
