KAI RYSSDAL: There are certain definitions that’re helpful to have handy when you’re talking about Wall Street. A 20 percent drop officially makes it a bear market. Ten percent is a market correction. Today’s close of the Dow, down not even a full percent, was nowhere close. But things have been strong for so long that three down days in a row are raising some eyebrows. We asked Marketplace’s Alisa Roth to find out what’s going on.
ALISA ROTH: There are plenty of factors that could be pulling stock prices down. Art Hogan is a market analyst at Jefferies.
ART HOGAN: Increasing concern about what’s happening in Iran, subprime mortgage companies that are having difficulties. We’re also seeing higher energy prices. We’re seeing a slow-down in housing stocks.
Those aren’t the only factors. Other commodities prices are high, too. And earlier this week the price of gold was at the highest it’s been in nearly a year. Some analysts are even raising the specter of inflation. Then again, others say a strong bond market suggests inflation’s not a worry.
Hogan says all those macroeconomic reasons may be making investors squeamish. But mostly, he says, people are thinking too hard.
HOGAN: One of the biggest reasons we’re seeing the pullback is because we haven’t seen one.
He points out that since July the market’s only been going up. And last month, it seemed to set a record every couple of days.
Phil Roth at Miller Tabak — we’re not related, by the way — says what’s more important is that there’s nothing to worry about.
PHIL ROTH: There’s a sort of a worry message in the market, but we’ve had no worry for so long you can’t conclude it’s the end of the world here. I mean, the market hasn’t had any kind of a pullback in so long, even a little one wouldn’t necessarily do a lot of damage to the market.
That is, as long as it doesn’t drag on. Analyst Hogan says this little drop could turn into something serious if something were to happen in Iran or North Korea. Or if subprime mortgage lenders started to get into real trouble. But then, he cautions, there’s no way to predict that happening.
In New York, I’m Alisa Roth for Marketplace.
We’re here to help you navigate this changed world and economy.
Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.
In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.
Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.
Donate now to get almost any thank-you gift.