US Stocks: Biggest Weekly Drop in Four Months

The Time

Though not unprecedented but still unexpected was the drop of the US Stocks. United States has been feeling the heat of the economic crisis in Europe for quite some time. The calamity that European economy is going through has left scar marks on US stock markets at times. But at a time when the economy is starting to show mild signs of recovery across the world this sudden plunge is going to affect adversely the recovery plans for the forex traders. However analysts are skeptic in their assessment of the situation and are not inclined to take early decisions.

The Drop

NyseUS stocks faced the biggest weekly drop in the market since June 2012. All of the ten industry groups in the 500 index of Standard & Poor’s scale faced a fall in the week. Technology companies slid 2.9 percent with cutting its sales forecast and Apple Inc. incurring most losses since July 2012. Consumer-discretionary shares dropped 2.9 percent after Dollar Tree Inc. announced the potential of low revenue. Others like Alcoa and Wells Fargo & Co. slumped 4.4 percent due to narrow profit margins.

The Reasons

It is important for the forex traders to know the reasons and understand them so that they are able to plan their next move. The reasons for the drop are various. Firstly, several companies have either incurred loss or have anticipated a cut in their profit margins as in the case of Advanced Micro Devices Inc. and Alcoa. In both the cases the company projections have disappointed the investors largely resulting in to a dive of stock prices. Apple’s loss on the other hand contributed towards the fall of the market.

Secondly, the International Monetary fund has revised and reduced its forecasts on global growth. It has reduced its estimate for 2012 to 3.3 percent from 3.5 percent. It is the slowest growth rate since the start of the economic crisis in 2009. Though confidence among US consumers has been seen in October it does not stop IMF from projecting an even slower growth rate if US and European officials do not act immediately to contain the crisis.

Most of the analysts are not in the position to come to a conclusion while evaluating the situation. According to one of them, the market is in maximum uncertainty during this quarterly period. He has added that though the earnings have not started yet but the companies with bad news are already putting their news forward and that is affecting the market adversely. He has said not to pay much attention to such news as it will increase the uncertainty of the market. Others say that previously economy used to channelize the stock market but now the stock market sets the path for economy. According to them earnings are not as important now as they were once.


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