Well, it’s now official. If a stock market “correction” is defined as a 10% decline from a recent high, then the Dow Jones Industrial Average made it Monday with its close at 12,743, down from its high close of 14,164 on Oct. 9. E-mini S&P 500 Index futures pushed below the 10% correction threshold last week, and Nasdaq reached the 10% level in the first 10 days of November. It’s the first 10% setback since March 2003.
Never mind that stocks turned right back around and shot up again Tuesday in what has been a volatile up-down seesaw pattern recently. According to media reports, Tuesday’s optimism was based, in part, on Abu Dhabi investing $7.5 billion in Citigroup stock, which the market sees as a sign that Citigroup will be able to stabilize its position after taking losses related to the subprime mortgage debacle. Shares that were valued at 55 as late as the end of May apparently looked like a value to someone in the low 30s.
Seems a little suspect to me. If a firm has to sell a piece of itself to rescue itself . . . I will leave the high-finance deals up to the wizards, but it sounds like the news at Citi could be worse than revealed. We shall see.
Dead ahead for the stock market are the August lows — 1374 for E-mini S&P futures and 12,517 for the Dow. If a 20% decline denotes an “official” bear market, there is still a ways to go to those checkpoints — 11,332 for the Dow and 1261 for the E-mini S&P. The Dow transports have almost reached the bear market target already.