What a U.S. Bear Market Would Look Like Now

Bear MarketStandard & Poor's first-time downgrade of U.S. debt -- from AAA to AA-plus -- on Friday, coming on top of concern of a possible second recession, have raised the specter of a bear market for stocks. A bear market is usually described as a 20% or greater drop from the most recent peak.

The Dow Jones Industrial Average traded above 12,700 in early May and then again in early and late July. It dropped to 11,300 by the end of Friday's trading, representing a collapse of 11% from that peak. A 20% fall would take the index down further to 10,200. So the DJIA could have another 1,100 points to slip.

If that happens, it wouldn't be the first time the DJIA has slipped into bear territory in recent history. The index plunged from 1,400 in September of 2008 to 8,450 in early October of the same year. Of course, the slide was caused by the credit crisis, and we're unlikely to see that same severity again.

Banks and Auto Makers Pull Market Downward

But financial shares are what could pull the market lower again this time, as concerns about bank balance sheets and poor earnings drive their shares down. Citigroup's stock (C) is off 25% in the last month, and Bank of America's (BAC) shares have fallen nearly 30%. Another set of stocks which have moved close to bear territory are GM (GM) and Ford (F), which are proxies for the U.S. manufacturing base. GM is down 17% in the last month while Ford is off 22%. Weak auto sales in July -- and concerns that the economic dip could make that situation worse -- have driven car stocks down and could well drive them lower.

Technology stocks have been critical to the rally that moved the market to recent highs. Some of the shares in big tech companies have begun to falter on concerns that large IT customers will cut back on purchases to preserve their margins. Shares of bellwether Cisco (CSCO) have slid 17% in the last month, while Dell (DELL) shares have fallen 15% in just the last three weeks

The U.S. markets may well slide again this week. There are certainly indications that could happen in the next two or three days.The market is closing in on bear territory, and more bad economic news could place it firmly there.


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paper7559

It will surely close on a negative note. Burn you SOB....Burn. I wish it would burn to the ground, and all it's crooks with it.

August 09 2011 at 2:30 PM Report abuse rate up rate down Reply
paper7559

crash baby crash..........There's nothing different today than yesterday. Explain why it's up today........yet was in the toilet yesterday. They toy with peoples hard earned money and livelyhood and think nothing about it. They should all be shot. They make Madoff look like an angel.

August 09 2011 at 11:48 AM Report abuse +1 rate up rate down Reply
daltonustynik

If teh US is such a bad risk why did equity holders sell and dive for US bonds? The future is not all dier for equities. we need more liberal policies instead of 193o herbert Hoover.The auto industry shows signsof life the Bush recession cost me 50 gs. Either Obama or someone got me 90 percent of it back. But tehTEA party playing withour money just cost me25 grand in one week. Unfortunately I think I see teh UK disaster coming to this country and I think its caused by teh nay sayers. FOX< and the nra rednecks, and the hatred that has been poisioning our airways . There is a class of people in this country who would rather see the economy go in teh toilet if only racism would come back

August 09 2011 at 11:36 AM Report abuse rate up rate down Reply
jkosters

I am not suprised with the selLOFF. I sold several funds recently that had risen quite well. The best of these FSCHX. With QE1 & QE2 gone I have been waiting for some profit taking on the rise from 09.
I wonder how much was made with the insiders again on the S&P rating rape. The market was ripe after 8 days trading down, nice timing S&P. I was out early last week, you didn't get all my profits. I held my short term positions and they are down and I'll be dollar cost averaging with the large cash position I now have.
I wouldn't touch gold unless it was in coins. They can't take that from you.

August 09 2011 at 11:19 AM Report abuse rate up rate down Reply
Big Don

Hell of a way to start a new day. But having been born in the days of the dust bowl and a depression helps to form a backbone & maybe w weak mind.

August 09 2011 at 8:21 AM Report abuse rate up rate down Reply
boxcar101

Douglas... DO you proof read your work? I see errors,

August 09 2011 at 7:51 AM Report abuse rate up rate down Reply
Larry

Non sequitur: A 20% fall would take the index down further to 10,200. So the DJIA could have another 1,100 points to slip.

August 09 2011 at 12:04 AM Report abuse rate up rate down Reply
winintnet

I AGREE WITH MIKE WHO EVER HE IS BUY GOLD -- BUY SILVER -- WAIT TILL YOU HEAR THAT OUR GOV IS GOING TO PRINT NEW MONEY. LIKE MAYBE A DEVALUATION OF THE CURRENCY --- HOW ABOUT THEY ISSUE A NEW 1 DOLLAR BILL AND YOU HAVE TO TURN IN 10 OLD DOLLARS FOR THE NEW ONE. YEAH LETS KNOCK OFF A 0 FOM OUR CURRENCY SO EVERY THING SOUNDS LIKE IT LESS TO PURCHASE YOU KNOW THE 300,000 HOUSE IS NOW ONLY 30,000 NEW DOLLARS OF COURSE YOUR 80,000 DOLLAR SALERY IS NOW ONLY 8,000NEW DOLLARS BUT JUST THINK A NEW CHEV IS NOW ONLY 3,000 AQND A LOAF OF BREAD IS .14 CENTS LOL IF YOU DONT BELIEVE THIS COULD HAPPEN THEN I SUGGEST YOU GO TO YOUR LIBRARY AND GET A FEW BOOKS ON FIAT CURRENCY.

August 08 2011 at 9:29 PM Report abuse rate up rate down Reply
winintnet

DID SOME INTERESTING CAL CULATIONS EVERYONE IS TALKING ABOUT REDUCING THE DEFICITES BUT NO ONE IS TALKING ABOUT ACTUALLY REDUCING THE DEBT . IF THE NATIONAL DEBT IS 14.4 TRILLION AND WE HAD A SURPLUS OF SAY 100 BILLION YES THAT BILLION EVERY YEAR AND APPLIED THE SURPLUS TO THE DEBT ( LIKE PAYING DOWN A CREDIT CARD ) IT WOULD TAKE 143 YEARS TO PAY IT OFF HOWS THAT FOR TRUTH IN LENDING !!! AND YOU THINK ITS OK FOR OUR GOVERNMENT TO KEEP BORROWING ? LOL

August 08 2011 at 9:18 PM Report abuse +1 rate up rate down Reply
vrudy2you

Buy when there is fear, sell when there is exuberance? Im buying.
There is no other place to put money that can survive another global recession, period.
He that bets against the US economy has lost every time, index funds with low mang. fees.
Talk to me in three years, when gold is half and stocks are 25-35% up.

August 08 2011 at 7:06 PM Report abuse rate up rate down Reply