U.S. Stock Market Poised for Another Huge Drop

U.S. Stock Market Poised for Another Huge DropFew stocks other than Amazon (AMZN) and Apple (AAPL) are trading near their 52-week highs right now. The stock market, as measured by the S&P 500, sits at 1,131, a low point it hasn't traded near consistently since late 2009. There's every reason to believe it will decline back to the levels it hit just before and after the sickening sell-off that bottomed in March 2009. In other words, the next correction could drop the S&P 500 to below 900.

The most obvious reasons for a new leg down are the trouble in Europe, high unemployment, the troubled housing market and the slim chance of Congress agreeing to any federal government stimulus plan late this year or early in 2012. But the most powerful downward pressure on the market is likely to come from fourth-quarter earnings forecasts. Many of those will be issued before the end of October.

Earnings have been solid for nearly two years thanks to most companies cutting their way to strong margins. But there appears to be little more in the way of expenses to eliminate. The means a near future outlook of lower earnings per share.The most vulnerable large industries are retail, automotive, consumer electronics, media and telecom. Each relies to a large extent on consumer activity. Each also relies heavily on strong fourth-quarter sales. As employment slips and consumer sentiment hits multiyear lows, the stocks of these companies will get battered. The other large sector in trouble is banking, although its problem is more related to balance sheet issues than consumer activity. The financial industry still has many of the most widely traded stocks, led by Citigroup (C) and Bank of America (BAC).

Optimists argue that with bank, retail and car manufacturing shares at 52-week lows, they're attractive based on P/E valuations and other standard measurements of value. But those metrics are only useful when the consumer economy is modestly stable. Right now, it's not. Free fall is a better way to describe the situation.


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crop duster

when the market gets to o it will all be over for the stock market we see it comming real soon.

October 04 2011 at 10:41 AM Report abuse +1 rate up rate down Reply
L78lancer

Just a few years ago when you talked to a broker or sales person or an account manager, they lauded the benefits of buying investments in the financial sector. Not too many years later the sector is on its back, struggling to hold on, and has lost the faith of the vast majority of its customers because it lost it's credibility and direction. Not only did naive unschooled investors loose, so the sophisticated well trained and knowlegeble investors. They could not have known the inner working of the market even if they did the best research, unless they were part of that industry. Eventually investors will come back and the financial sector will be viable again. But because many customers have lost their homes, the jobs and savings because of self-inflicted actions and behaviors of the sector it has handicapped itself and created it's own Mt. Everest for a recovery. And until the people in the sector develop some courage, creativity and honesty, they will delay the recovery that they so desparately need to survive and that their customers need to again thrive. The individual who run that market should understand that every bit of the anger that they receive they deserve and they've earned; it's up to them to win us back.

October 03 2011 at 9:45 PM Report abuse rate up rate down Reply
1 reply to L78lancer's comment
L78lancer

...so did the sophisticated...
...The individuals who run that market...

October 03 2011 at 9:47 PM Report abuse rate up rate down Reply
Morris Cantonitis

The clouds stand Daarck for the Wall Alley PIGGS.
NO where for the PIGG to run.
No where for the PIGG to hide.
Satan has Mushroom Fun.
Won’t need formaldehyde.
Gifts from Satan
AS the Clock ticks the Hour.
Where are the Futures?
NO MORE PIGG power.
There can be ONLY 1 PIG and for Satan’s stew
NYC GETS NUKED, #1 hot n spicy pork barbecue.

October 03 2011 at 7:18 PM Report abuse -2 rate up rate down Reply
Morris Cantonitis

The wall alley pigg is fading fading

Satan has orders for wonderful NYC pizza with - yes - U guessed it.
Shrooms. Just a few BIG ONES.

Yes. Lets fix Europe. Their market goes up.

NYC GETS NUKED

October 03 2011 at 4:50 PM Report abuse -3 rate up rate down Reply
vasilios

700 hundred one day Dow loss coming very soon.Option puts are out numbering option calls by a margin of 7 to 1.
Get out ,it's not going to recover a second time.

October 03 2011 at 4:23 PM Report abuse rate up rate down Reply
1 reply to vasilios's comment
lazyh

Last time every one was yelling, "Get out!!" was early in 2009 when the Dow was at 6500. The weak players got scared out of the market, but smart money was buying. Within a year, stock prices doubled with the Dow hitting 13000. What goes up must come down--and vice versa.

October 03 2011 at 4:50 PM Report abuse rate up rate down Reply
rollytamayo

Be optimistic. Better things will be in the horizon after this uncertainties..

October 03 2011 at 4:12 PM Report abuse rate up rate down Reply
lazyh

What is the point of this article? The author states the market "has every reason to" decline to the lows of 2009, then offers a few pat explanations which are gross oversimplifications. In fact there are more diferences than there are similiarities to the bear market of 2008-2009.

October 03 2011 at 3:34 PM Report abuse +1 rate up rate down Reply
NEAL D. STERBERG

Talk about immaturity comments. Get a life you people.

October 03 2011 at 3:08 PM Report abuse rate up rate down Reply
switzarch

'Darkcloudcoward', not totally accurate, "LL" has been selling iPods and 'car insurance' as well. You think he and his handlers woulr wise up to the fact that folks don't even bother reading their posts anymore. But, at least it keeps "LL" off of the streets or wearing a sandwich board along major highways. He's the one in the pork pie hat and sandals.

October 03 2011 at 3:06 PM Report abuse +2 rate up rate down Reply
John T's Voodoo

The U.S. is broke and on its way to socialism. Particularly in New Orleans where entitlement reigns supreme. Soros, Pelosi, Frank and Reid are leading the country down the yellow brick road. Those who work for a living are getting tired of paying for those who don't. The stock market is nothing more than a huge Ponzi scheme. Better invest in gold.

October 03 2011 at 3:05 PM Report abuse +4 rate up rate down Reply
1 reply to John T's Voodoo's comment
duckyjoestoys

You're an idiot.

October 03 2011 at 4:18 PM Report abuse -1 rate up rate down Reply
2 replies to duckyjoestoys's comment
longeye

He just watches Fox News, and yes he is an idiot!

October 03 2011 at 5:44 PM Report abuse -1 rate up rate down
savemycountry911

long and duck, you are the idiots. It doesn't take FOX to see what is coming. Are you both welfare Socialists?

October 03 2011 at 6:44 PM Report abuse +1 rate up rate down