On Monday, the Dow Jones industrial average experienced the heaviest intraday point drop in itss history, which sent markets reeling worldwide. During closing hours, the Dow plummeted 1,175 (4.6 percent) on a single day.
It is the largest point drop in a day ever seen on the U.S. stock market, but things are not as devastating as the media is trying to depict them. The worst day for the Dow was ‘Black Monday’ on Oct. 19, 1987, when the blue-chip index had the highest percentage drop in its history. On that day, it lost 22.61 percent which wiped out $500 billion of its value.
This Monday’s loss was also significant as it managed to wipe out all the earnings accumulated this year. But analysts insist that a “correction” has been in the making after a full year of enormous stock gains.
It is worth noting that The Dow Jones Industrial Average is ranked as one of the most important stock indexes on the planet. Its value reflects around 25% of the U.S. stock market value. The companies that make up the Dow include titans like IBM, Apple, Walmart, and Microsoft.
These companies’ stock is worth trillions of dollars and the Dow points are a less complicated method of keeping track of the sheer amount of cash being traded on the stock market.
So, What Happened Monday?
Experts cannot agree on what led to the Dow’s historic loss on Monday. According to one hypothesis, investors likely panicked over the wage raise in the United States which may lead to inflation. If wages raise, the federal government usually hikes interest rates, which means that the demand for goods and services stall as households tighten up their budget to be able to pay their mortgage. So, investors flocked to sell their assets before the prices of those goods and services dropped.
Another hypothesis claims that the massive sell-offs Monday were caused by machines, which failed to assess the risks properly, while a third hypothesis claims that the steep Dow drop was in fact a “correction” caused by a year of artificial gains, and the Dow’s value right now is its real value.
Image Source: Wikimedia
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