I understand that the S&P downgrade of U.S. credit has caused turmoil in the stock market but can someone explain the logistics of the situation even starting from Monday. Like why did stocks even fall in the first place (monday), and then why did they rally so good yesterday (tuesday) and then why did it drop so much today (wednesday). Im completely clueless about this stuff and want to know more
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It's (mostly) entirely based on fear. There havnt really been any fundamental changes (at least not on the scale to warrant the massive drops last week). Basically these are the key features:
1 - US debt crisis and utter failure of US politicians to act like responsible adults
2 - Greek (and subsequent Eurozone) debt crisis and the seeming lack of political will to implement sufficient austerity
3 - Downgrade of US rating (still being treated as AAA though)
4 - Investor fear causing sell-offs
5 - ECB buying Italian + Spanish bonds caused the European rally yesterday, but today (Wednesday) the markets basically decided it was halfhearted
6 - FOMC keeping interest rates very low today caused a brief rally, which has since reversed
7 - Today the BoE announced reduced growth forecasts (1.5% down from 1.8%) which helped the 3% fall in the FTSE
TL;DR. Fear, debt, lack of politcal will = falling markets
above post is right. fear is mostly causing this volatility. People fled the equity markets and found a "safe haven" in US treasuries. Yields are low and prices increasing. DOW falls dramatically. Investors still flock to US Treasuries despite the US being downgraded to AA+ by S&P. I'm assuming that's because mostly everyone considers the US as risk free. Then, markets begin to rise, but dropped once Fed made announcement/decision about economic outlook. Investor's scared and uncertain of the economy so they flee again, thus markets drop lower.
That's all I've got so far, didn't catch up on news today, too busy.
Can anyone update on this. How come the dow spiked up thursday and solidified friday?
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