The Dow plunge: 5 theories
Why stocks are stumbling even though economists say the recession is over
Stocks sank on Thursday, with the Dow Jones Industrial Average dipping below the psychological barrier of 10,000 briefly for the first time in months. And, despite signs the recession is over, investors remained worried early Friday. What's going on? (Watch an AP report about the Dow's plunge)
1. Blame Europe: Debt problems in Europe triggered Thursday's "near panic," says Paul Tharp in the New York Post. With Greece looking briefly like it might default on its debt, and Portugal in trouble, too, investors were looking for "safe but elusive havens."
2. U.S. unemployment fears hurt: The government released figures showing an unexpected jump in jobless claims last week, says Frank Ahrens in The Washington Post, and investors are bracing for more bad news on Friday. The markets can't resume their climb until jobs come back.
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3. It's a normal correction: The economy has improved, says Roger S. Conrad in Seeking Alpha, so the "odds of a full-scale panic" are low. But stocks shot up by 60 percent last year -- we're due for what could be a painful correction.
4. It's psychological: Investors officially got scared in January, says Tomi Kilgore in The Wall Street Journal, as improvement in housing and labor markets appeared stalled. If we sink solidly below the psychological barrier of Dow 10,000, it will mean confidence is gone and the investment bears may be back.
5. Volatility is the new normal: Welcome to the "just OK market," says Paul R. La Monica in CNNMoney.com. The recovery has started but ordinary Americans are still hurting. Bulls and bears are in a tug-of-war, so 2010 will see a lot more days with triple-digit gains, and losses.
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