Whiff of Panic? Global Bear-Market Progress Report

Monday, February 8, 2016
By Paul Martin

by Wolf Richter
WolfStreet.com
February 8, 2016

For once, aggrieved investors can’t blame China. Markets in China are closed for the New Year’s holidays.

After a very ugly week, we expected stock markets to rise this week on the simple principle that nothing goes to heck in a straight line. But we’ve been wrong on this before, and that line could be straighter than we’d expect. So, the US and Europe are starting out the week with a rout.

Last week in the US was particularly ugly for momentum stocks, and for companies that had announced lousy earnings or given squishy forecasts, and even for startups with recent IPOs that were once highfliers and have now crashed. Not even the promise of share buybacks works anymore. Financial engineering has lost its effectiveness. Central-Bank imposed negative interest rates aren’t propping up stocks anymore. None of these tricks works anymore. That’s what markets are learning.

And today, the theme carries over. At the time I’m writing this, the Dow and S&P 500 are down about 2.4%. The Nasdaq is down 2.8%, scooting closer to a bear market: down 19% or nearly 1,000 points from its high last June.

In Europe, last week was tough: The London FTSE -3.9%, the German DAX -5.2%, the French CAC 40 -4.9%, the Spanish IBEX 35 -3.6%, the Italian MIB a juicy -7.5%. A lot of people define a bear market as a 20% decline from a (more or less recent) high. As of Friday, all of these markets, except the FTSE, were already in a “bear market.”

The Rest…HERE

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