“The big story yesterday was not some possible computer glitch (though that was the weirdest 20 minutes in front of the Bloomberg in my professional life), but the fact that the contagion risks are turning into reality in the Eurozone periphery,” said David Bloomberg, chief economist and strategist of Gluskin Sheff & Associates, regarding the dramatic break in equity markets on Thursday.

For those who missed the “live” action on Thursday, and the continuation of the declines on Friday, the one-minute chart below serves as a vivid reminder.

Source: StockCharts.com

Putting the decline into historical perspective, Bespoke shows in the table below that Thursday’s intraday decline was the third largest point swing in the history of the Dow Jones Industrial Average and the ninth largest in percentage terms since 1980.

Source: Bespoke, May 6, 2010.

Rosenberg has also put together the following list of items worrying him most about the lie of the investment land:

  1. Greek default and contagion risks to European banks.
  2. ECB dragging its heels (á la Bernanke in 2007).
  3. Hung parliament in the U.K. to add to uncertainty.
  4. China policy tightening and possible bubble burst in real estate.
  5. U.S. economy only managing 1.6% annualized real final sales growth in the past three quarters.
  6. Slide in Chinese stock market and commodity prices signalling an end to the global V-shaped recovery.
  7. Big fiscal drag will drain as much as two-percentage points off U.S. growth next year; 1.25 percentage points in Canada.
  8. Higher dividend and capital gains rates in the U.S. will curb investor enthusiasm.
  9. U.S. dollar surge will eat into U.S. large-cap corporate earnings.

10. Every index is now showing a return to U.S. home price deflation.

Source: David Rosenberg, Gluskin Sheff & Associates – lunch with Dave, May 7, 2010.

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