Stocks fall around the world
U.S. Dow Jones Industrial Average gains for the year wiped out
San José, CA – Stock markets around the world fell on Monday, January 27, with U.S. stocks down about 1.5%, the biggest fall since October of last year. The headline Dow Jones Industrial Average (DJIA) fell more than 450 points, wiping out all the gains made earlier in the year. Many overseas markets saw even deeper declines, with European stock off 2.5%.
Up to now, the U.S. stock market had shrugged off bad news to reach record highs over and over again. The Dow Jones Industrial Average, an index of stock prices of large corporations, was up 20% for the year. The most widely cited reason for the stock drop was fear that the new coronavirus, and China’s efforts to slow the spread of the disease, would slow the Chinese economy and through trade, slow much of the rest of the world’s economy. But behind this trigger were the historically high stock prices relative to the corporate profits that those prices ultimately rest on.
But even more fundamental than overoptimistic and greedy investors are the continuing signs of economic weakness that just keep on coming. The latest sign is a worldwide slowdown in housing markets, leading to a slowdown in new home construction over the last year. While not enough to indicate that a recession is around the corner, it still increases the likelihood for this year.