Bad Friday for U.S. but Black Monday for Asia

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Oct 21 2007
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Call it coincidence, myth, haunted, eerie or whatever you wish but the fact is on 20th anniversary of Oct 19th 1987’s “Black Monday” crash that saw Dow Jones plunged by 26 percent, the same happened last Friday (19th Oct 2007). Only this time the Dow fell by a lower percentage which is 2.64 percent but the quantum of 366 points drop is nevertheless disturbing.

For the week, the Dow lost 571.06 points, or 4.1 percent, to close at 13,522.02. The Standard & Poor’s 500-stock index fell 61.17 points, or 3.9 percent, to close at 1,500.63. The Nasdaq composite index dropped 80.52 points, or 2.9 percent, to close at 2,725.16.

Dow plunged 366 pointsMany investors got worried when news emerged last weekend that the U.S. Treasury department had been involved in helping bring large banks together to rescue others that can’t fund their off-balance sheet structured investment vehicles. But while technology stocks performed well last week, it was offset by earnings disappointments from Dow components such as 3M Co., Honeywell Inc. and Caterpillar Inc. on Friday. The biggest drag however was the banking industry nevertheless.

Last week, two-month Treasury bills rallied the most since Sept. 11, 2001 – which shows that investors have re-embarked on a flight-to-quality trade, perhaps betting that the economy is weaker than expected and that the Federal Reserve is likely to cut interest rates again. The CBOE Volatility Index, often called the fear index, added 24% Friday to a reading of 23, its highest reading in a month.

This is what you can never control, the macro and external factor that created fears into the soul of investors. I believe if not for the fear across the board, my Google would have create another history with its gap-up – at least that’s what I hoped for. And the whole set of Nasdaq investors would shift their intention to Apple Inc.’s earning announcement next week, Monday after market closes. Investors would be presented with other set of earnings thereafter from Motorola Inc., Boeing Co, Baidu.com Inc. and of course the infamous Countrywide Financial Corp.

To add fuel into fire next week, global economic leaders warned of inflation risks in advanced countries when IMF (International Monetary Funds) noted rising food and oil prices and other indications of inflation. Whether the bear from last week will continues to haunt investors this week is still unknown but you can be sure of a double-digit plunge when Asia stocks markets (including Malaysia) open on Monday.

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