Carnage on Wall Street

The correction in the market that many market observers have been talking about for months finally occurred yesterday with the Dow Jones Industrial Average falling 416.02 points or 3.29% in a single trading session, the biggest one day drop in more than 5 years. At one point during the day, the Dow fell as much as 200 points in just one minute. The Nasdaq fared even worse than the Dow; it fell 96.66 or 3.86% yesterday, wiping out all of its gains for 2007. Not a single sector of the market was spared and commodities like steel, silver and gold were the hardest hit.

So what caused this sudden drop in the markets? It is usually hard to pin the movement of the market to a single factor and it is actually quite amusing to watch the media try to explain why the market moves in a certain direction almost every day. Amongst many other factors, the following events were weighing down the market yesterday:

• The Shanghai Composite Index fell 8.8% in a single day, sparking off a global sell-off.
• The Indian BSE Sensex fell 1.3% today but has fallen more than 8% since reaching a record high of 14,652 on February 8th.
• Alan Greenspan, the former chairman of the Federal Reserve, made comments on Monday about the possibility of a recession in 2007. 
• Spot prices for trucking continue to remain weak and railway freight volumes have slowed down leading a couple of analysts to make bearish calls on the transportation sector yesterday.  
• The mortgage industry remains under tremendous pressure in the face of rising foreclosures and a fall in median home prices.
• The Dow had risen without a 2% correction for well over 7 months, the longest stretch since 1954.