Because US markets were closed Monday, January 21st in observance of Martin Luther King, Wall Street slept through the day totally unscathed. But not so the rest of the world’s markets. Stock prices from Britain to Germany to China and Japan to Canada plummeted, suffering from over 3% to as much as over 7% losses. What is in store for US markets when they reopen Tuesday, January 22nd?
Foreign markets dove in reaction to both the decline in US stocks last week as well in response to President George Bush’s economic stimulus plan presented earlier last week. (See here for the AP report.)
One news report claimed that stocks plummeted across the world on Monday amid fears of a global recession, with markets in Europe suffering their biggest one-day losses since the September 11th attacks on the United States. (See this article here.) And we are not, of course, the only ones saying markets on Tuesday will decline. (See here.)
A reasonable person has to ask: Will our markets suffer on January 22, as the rest of the world did on the 21st? A precipitous drop of, say 600 points, would amount to an approximate five percent (5%) decline on the Dow Jones Industrial Average (DJIA). Will January 22nd become “Black Tuesday” for the 21st Century?
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American capitalists must be saying: “Thank God for Martin Luther King”.
Well, the crisis was averted, for now, after an unusaul emergency rate cut by the Federal Reserve; after a global rout in stock markets on Monday, the Fed cut its overnight lending rate by 75 basis points to 3.50% before the market opened Tuesday. Minutes after opening, the market fell nearly 500 points, but due to the emergency move, climbed back up to jump around like a roller coaster until settling down to a loss of 128 points.