Just when you thought that things couldn’t get any worse, they did. During normal times, a Friday before Christmas is an extremely boring trading session, but these are not normal times. On Friday, the Dow Jones Industrial Average was down another 414 points, and that brought the total drop for the week to 1,655 points. The marketplace has been completely gripped by panic, and CNN’s Fear & Greed Index has just registered the highest “fear rating” that we have ever seen. I keep saying that we have not witnessed anything like this since the last financial crisis, and the numbers clearly back that assessment up. In fact, this was the largest weekly percentage drop for the Dow since October 2008.
The Dow just suffered its deepest weekly plunge since 2008 and the Nasdaq is officially in a bear market.
The miserable performance reflects deepening fears on Wall Street of an economic slowdown and overly-aggressive Federal Reserve.
Apprehension about a looming government shutdown and anxiety over higher interest rates were two of the major factors that pushed stocks down on Friday.
Normally trading volume is very, very light in the days leading up to Christmas, so what we just witnessed was extremely unusual. Trading volume on Friday was “really heavy” with “more than 12 billion shares” changing hands.
When I have warned about a “rush for the exits” in the past, this is the kind of thing that I am talking about.
Many investors were panic-selling on Friday because they wanted to be out of the market before things closed down for the holidays, and stock prices just kept getting hammered lower and lower.
For the week, the carnage was absolutely colossal. The following is how CNBC summarized what happened:
- The Dow lost 6.8 percent and 1,655 points on the week. It was its worst percentage drop since October 2008.
- The Nasdaq lost 8.3 percent on the week and is now 22 percent below its record reached in August, a bear market.
- The S&P 500 lost 7 percent for the week and is now down 17.8 percent from its record.
- The Dow and S&P 500, which are both in corrections, are on track for their worst December performance since the Great Depression in 1931, down more than 12 percent each this month.
- Both the Dow and the S&P 500 are now in the red for 2018 by at least 9 percent.
It should also be noted that the number of stocks hitting 52-week lows right now is at historically high levels. The following comes from Zero Hedge.
Since 1984, there were only eight days when a bigger proportion of shares did so, according to Sundial Capital Research. Two of them were in 1987 — during the famous Black Monday crash, when the Dow Jones Industrial Average lost 23 percent in one day, and then again during the following session. The rest were in the aftermath of the collapse of Lehman Brothers in October and November 2008.
And it isn’t just stocks that are getting hammered. In fact, at this point 93 percent of all asset classes are down for the year.
As so many have already said, 2018 is a year when literally nothing is working.
A similar thing is happening over in Europe, where stocks are on pace for their worst year since 2008. We are watching a truly global meltdown take place, and trillions upon trillions of dollars of paper wealth is being washed away.
Of course not everybody has lost money. Those that sold before this stock market crash started made out like bandits, and it is very interesting to note that over the past couple of months “the smart money” has been getting out of stocks at a pace that we have never seen before.
So what happens next?
For now, there will be a pause. The stock market will be closed for the weekend, then it will open for half a day on Monday, and then it will be closed for Christmas on Tuesday.
Hopefully this “cooling off period” will help things to be much calmer by the time the markets open on Wednesday.
But even if things do calm down during the holidays, the truth is that this crisis is far from over.
The largest financial bubble in U.S. history is starting to burst, and a great deal of pain is ahead.