In complex adaptive systems like modern financial markets, a change the price of any one market has ...
Where Were You 1,305 Weeks Ago?
10/24/2012 7:45 am EST
Friday was the anniversary of Black Monday, and while we've seen darker days since then, it's interesting to look back and put things in some perspective with this iconic event, notes Ron Rowland of All-Star Fund Trader.
Do you remember where you were 1,305 weeks ago? Friday was the 25th anniversary of the stock market crash of 1987. Known as Black Monday, the market took a 22.6% plunge in one day.
If you were tuned into live market coverage last Friday, you witnessed the media response to the day’s 205-point drop in the Dow Jones Industrial Average. Had Friday’s action been a repeat of 25 years ago, the loss in the Dow would have been 3,063 points, nearly 15 times greater. It’s hard to image the various news channels maintaining any sense of composure during such an event.
You wouldn’t know it by watching Friday’s hoopla, but many broad market indexes finished the week with a gain, including 0.1% for the previously mentioned Dow. International markets did even better, with iShares MSCI EAFE (EFA) moving ahead 1.8%.
One area that did indeed falter was technology. As earnings announcements rolled out, one tech company after another failed to meet expectations and/or painted a gloomy forecast.
Sales fell 5% at IBM (IBM); earnings dropped 11% at Intel (INTC) and plunged 22% for Microsoft (MSFT). Even Google (GOOG) missed revenue expectations and earnings actually fell 7%, although it seems like Google’s accidental early release of its earnings garnered more attention than the report itself—perhaps that was the plan all along.
We are seeing good strength in the large cap value style and materials sector. We will take advantage of these trends by establishing new positions in iShares Russell 1000 Value (IWD) and Rydex Basic Materials (RYBIX).
Although earnings disappointments grabbed most of the attention last week, some companies delivered stellar results. Among the winners was eBay (EBAY), which also happens to be one of our holdings. Earnings and revenue were both up 15%, and the company confirmed 4Q guidance. Its PayPal unit fueled much of these results, as sales soared 23%.
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