Not a time to panic, local financial expert says
The Dow Jones Industrial Average reacted strongly Thursday to what may have been a typographical error, at one point dropping as much as 998 points before bouncing back to close the day down 347 points.
What made that huge drop unusual was it occurred over a time span of about 30 minutes.
Here in Grand Junction, though, Mike Berry, a certified financial planner for Colorado West Financial Advisors, 372 Ridges Blvd., said no one was panicking.
He said he has been telling his clients to expect an 8 percent to 10 percent correction in the U.S. stock market by this summer.
He didn’t, however, expect it to come in one afternoon.
“This is probably a good reason to have a correction and consolidation in the market, because the market’s been up pretty much on a rocket ship ride for the past 14 months,” Berry said. “You can’t go up at that level with the gains that they had without some consolidation. People have been skeptical about the market’s gains ... because the economy hasn’t exactly been moving in great shape.”
The Dow had dropped nearly 9 percent at one point in the day but quickly recovered much of that loss, closing down 3.2 percent.
According to the Associated Press, there were reports that the sudden drop was caused by a trader who mistyped an order to sell a large block of stock. One possibility being investigated was that a trader accidentally placed an order to sell $16 billion, instead of $16 million, worth of futures, and that was enough to trigger sell orders across the market.
The market was already wobbly because of fears that Greece’s debt crisis will undermine the economic recovery.
Europe’s markets had already closed by the time of the drop, but markets in Britain and Germany were only off by about 1 percent before they closed. Markets in Brazil, Canada, Chile and Mexico similarly dropped Thursday, but by no more than 2.3 percent.
Some of the world markets’ woes stemmed from warnings that Greece’s debt problems also could impact banks in Portugal, Italy, Spain, Ireland and Britain, meaning investors could see more volatility in the market before they close today, Berry said.
“I can’t believe that Europe is going to let some of these countries fail debt-wise,” he said. “That would just wipe out the whole European concept of one economy entity. We’re seeing a lot of people saying, ‘We’re getting out for a few days.’ Friday’s usually a tough call, but I wouldn’t be surprised to see another downturn.”
After months of watching Greece’s debt crisis threaten to spiral out of control, European leaders now are stressing a willingness to act in support of their 11-year-old project in sharing a currency.
“There are some legitimate concerns about the European debt, but there are some legitimate concerns about the U.S. debt for that matter,” Berry said. “In my mind, people can use this as a good reason to take some money off the table and see what happens. But we believe you need to have international exposure, and to still have it and not push the panic button.”
The Associated Press contributed to this report.