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To put things in perspective: https://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_Dow_Jones_Industrial_Average https://en.wikipedia.org/wiki/List

To put things in perspective: https://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_Dow_Jones_Industrial_Average https://en.wikipedia.org/wiki/List_of_largest_daily_changes_... Saying "Biggest Point Drop in History" is a deliberate attention-grabber and incites more fear than it probably should. We should be more concerned with percentage changes and at -4.6% this doesn't even make the top 20 daily percentage drops, which cuts off at -6.98% for number 20 (see above link).

deleted 9y ago
[deleted]
dkhenry 9y ago
But I think it clearly shows the standard of journalism we live with. This is a headline about numbers so we can easily debunk it by looking at the numbers, but almost every headline you read has been sensationalized in a similar fashion. This is the kind of reporting you expect from tabloids.
- leggomylibro 9y ago
  I dunno, I thought the BBC's coverage laid out some possible rationales without being too over-the-top. And while it isn't a tabloid, they aren't exactly a finance-focused paper: http://www.bbc.com/news/business-42942921 http://www.bbc.com/news/business-42942921 >...It is the largest fall in percentage terms since August 2011, when markets dropped in the aftermath of "Black Monday" when Standard & Poor's downgraded its credit rating of the US. >US investors are reacting to small but significant changes in the outlook for the American economy, and what that might mean for the cost of borrowing. >The stock market sell-off accelerated on Friday when the US Labour Department released employment numbers which showed stronger growth in wages than was anticipated. >If salaries rise, the expectation is that people will spend more and push inflation higher. >To keep that under control, America's central bank will need to raise interest rates, which is what has spooked investors who were expecting the US Federal Reserve to increase rates only two or three times this year. >They now predict there may be a few more interest rate rises on the horizon. >Monday's sell-off was driven by firms moving to sell stocks to put more money into assets such as bonds which benefit from higher rates, says Erin Gibbs, portfolio manager for S&P Global Market Intelligence. ...
  - mtanski 9y ago
    >If salaries rise, the expectation is that people will spend more and push inflation higher. Sure sucks to be a worker. When your salary rises your real gains will be inflated away.
    - vkou 9y ago
      If salaries aren't coming out of investor profits, they have to come out of the cost of goods. The only way workers can win is: 1. Productivity gains make goods easier to make. 2. A bigger share of investor profits get redistributed to workers, be it through taxes, pension fund investments, co-ops. #2 will not be happening anytime soon.
      - eli_gottlieb 9y ago
        >2. A bigger share of investor profits get redistributed to workers, be it through taxes, pension fund investments, co-ops. >#2 will not be happening anytime soon. That sound you hear in the distance is a recital of the Internationale.
      - Retric 9y ago
        #2 happens every time unemployment drops. Yes higher worker pay increases inflation, but it's far from 1:1.
      - sokoloff 9y ago
        [Some] Workers can individually win by forcing themselves to spend less than they earn and investing the surplus. In other words, another way that workers can win is by becoming investors/owners.
        vkou 9y ago
        That's a great idea. Let's all quit our day jobs, and buy into the S&P 500. At the end of the day, someone has to 'waste' money, in order for companies to earn money. A quarter saved is a quarter that doesn't end up on a revenue sheet.
- longerthoughts 9y ago
  >This is the kind of reporting you expect from tabloids. Unfortunately this is the kind of reporting I've come to expect from everyone. I can't necessarily blame them - their job is getting more views than the other guy and "Dow Has Bad Day" doesn't attract as many viewers as "DOW HAS WORST DAY EVER". At the end of the day it wasn't a lie, it was just going with the more interesting stat without regard for whether or not it was the most informative for readers. I wish it wasn't so, but we can't expect better without changing the incentives.
- Brockenstein 9y ago
  You know, I get the sentiment of these sorts of posts. But it doesn't really seem to matter at which point in history you think is the golden age of journalism, they were still selling the news and that often meant sensationalist headlines on the front page fairly often to grab attention and pull readers in. This is not a new thing on any level. You can quibble that news stories were "less" sensationalist in the past, but that's very debatable. It's not as if anyone in this thread from 2018 can rattle off the ten headlines from 1918 or pretty much any year they didn't live through. So I would take any appraisal's of today's news compared to the past without some hard data to back it up with a few grains of salt. I'm of the mind the more things change, the more they stay the same as far as this subject goes.
craftyguy 9y ago
You're silly if you just look at one day point/percentage drops. I'm not saying we're in for another recession, but many of the other events in the table you linked are actually part of a cluster of big drops, spread over several days. There was a ~600pt drop last Friday. It'll be fun to see what the rest of the week is like!
- totalZero 9y ago
  Do you not agree that relative moves (%) are more useful in characterizing the significance of a selloff?
  - roenxi 9y ago
    Percentages are important, but one day movements are not. I think GPs point went to this logic: comparing one-day moves is irrelevant once we have, say, weekly or annual data. I think this movement is very interesting, but only because I expect more of the same and/or a distinct lack of recovery. If a 5% one-day move is really it then I don't care. I've never paid any special interest when the market rises by 5%. Markets go up and down.
    - totalZero 9y ago
      Perhaps it would alter your perception to know that many large derivatives are valued using end-of-day prices, or even intraday prices (as is the case with one-touch options), and that the volume of trading is generally highest (and thus allows the most liquidity for hedging) at the opening and closing moments of the trading day. Not to mention that the significance of a variance injection is usually a function of its timescale. I want to point out that market mechanics are vastly different when individual daily moves are higher, even if weekly moves are identical. In other words, there is a path dependency. Stop orders get triggered as a result of price action. The price of option products tends to increase in high-volatility moments. Day traders and market makers have intraday losses that alter the way they trade, both psychologically and according to the rules of their firms. Price discovery becomes more difficult, which makes market access more expensive. The fundamentals of companies may not change directly, but the cost of doing business changes for financial companies, and that can affect other companies on a larger timescale. For example, a media company that does stock buybacks via accelerated share repurchase agreements will have a fundamentally different deal profile if it expects volatility to be higher, because these agreements often include terms for cancellation if the stock dips beyond a particular price. Highly volatile markets can also affect companies' ability to access money by borrowing from banks or selling financial assets. So, even on a longer-term horizon, higher daily volatility makes the financial regime inherently different, even if weekly volatility remains unchanged. If you relegate big daily moves to the realm of "I don't care," you prevent yourself from perceiving some of those differences, and ultimately only harm yourself -- the rest of the market, by and large, understands that big daily moves have an impact on the market even if they are reversed shortly thereafter.
thansz 9y ago
This. You have to take a look at percentage market moves. The markets have been moving up for a long time. A 1000 point drop when the market is at 26,000 is not the same as a 1000 point drop when the market is at 16,000.
- schoen 9y ago
  The Dow 10K (let alone 20K) still takes getting used to for me -- I remember figures around 4000 in my childhood. ... at which point a 1000-point drop would have been seen as much more significant. Edit: although apparently I'm remembering a slightly later era than I thought.
starpilot 9y ago
It looks like it might be in the top 100 though. Considering these are changes per day, and the chart covers around 100 years or 25,000 trading days, this puts it in the top 0.4% of largest percentage daily losses. So, it does appear to be a significant losing day if 99.6% of such days are smaller in magnitude.
- quickthrower2 9y ago
  About 0.3% of days are my birthday.
  - jerkstate 9y ago
    well, happy birthday to you then!
  - hamandcheese 9y ago
    Despite the downvotes, the point seems valid on its surface. We should expect a losing day this bad or worse more frequently than once per year, which doesn’t sound that scary. On the other hand, I wouldn’t expect losing days to be evenly distributed (in the short to medium term at least) but rather clumped together.
- Obi_Juan_Kenobi 9y ago
  It's also significant given the overall state of the market. http://www.macrotrends.net/1319/dow-jones-100-year-historical-chart http://www.macrotrends.net/1319/dow-jones-100-year-historica... http://www.multpl.com/inflation-adjusted-s-p-500 http://www.multpl.com/inflation-adjusted-s-p-500 Even accounting for an overall growth trend (e.g. real GDP) the market is looking quite overbought and prepared for a major crash. Signs of weakness like this are significant. It certainly doesn't guarantee a crash, but it's newsworthy IMO. Especially in the context of a decade of QE and the fed raising rates.
- Retric 9y ago
  Dow has more up days than down. So among down days this is closer to 1% than 0.4%.
- 9y ago
wrs 9y ago
As an index bizarrely weighted by price per share and a somewhat arbitrary divisor, the DJIA isn't what you'd choose to report on in the first place if you cared about anything but sentiment.
- kaycebasques 9y ago
  It's also a small basket of 30 US companies. A lot of big, important companies across different industries, sure. But it's just another aspect to consider.
pfarnsworth 9y ago
The only ones that matter are the ones that occur after roughly 1995. Most people weren't in mutual funds or stocks the way they are today. When the stock market dropped 50% in 2008/2009, so many people in retirement age were ruined because their retirement money was in the markets. A greater number of people's financial health is based on the stock market in 2018 than it ever did in the 1930s or 40s. In 1987, when the markets crashed 25%, it was interesting and scary, but if that happens today, millions of Americans need to push back their retirement by a dozen years. It's much more meaningful today because so many more people are affected by it. One of the great feats of social engineering that Wall Street has done in the several decades is convincing regular people that they should have their money in the stock market. That lets them make billions of dollars "taking care of" their money without any personal risk themselves.
- kaycebasques 9y ago
  > When the stock market dropped 50% in 2008/2009, so many people in retirement age were ruined because their retirement money was in the markets. Interesting perspective on why central bankers have seemed so complacent about high stock valuations. I've also heard commentaries that the wealth effect was one of the tactics used to drag the US out of the Great Recession. https://en.wikipedia.org/wiki/Wealth_effect https://en.wikipedia.org/wiki/Wealth_effect
- 111_1_111 9y ago
  Out of curiousity, where do you think people should put their money if not the stock market?
- gaius 9y ago
  One of the great feats of social engineering that Wall Street has done in the several decades is convincing regular people that they should have their money in the stock market. Ironically you could call this “owning the means of production”
  - draw_down 9y ago
    Nope.

deleted 9y ago

[deleted]

dkhenry 9y ago

But I think it clearly shows the standard of journalism we live with. This is a headline about numbers so we can easily debunk it by looking at the numbers, but almost every headline you read has been sensationalized in a similar fashion. This is the kind of reporting you expect from tabloids.

leggomylibro 9y ago
I dunno, I thought the BBC's coverage laid out some possible rationales without being too over-the-top. And while it isn't a tabloid, they aren't exactly a finance-focused paper: http://www.bbc.com/news/business-42942921 http://www.bbc.com/news/business-42942921 >...It is the largest fall in percentage terms since August 2011, when markets dropped in the aftermath of "Black Monday" when Standard & Poor's downgraded its credit rating of the US. >US investors are reacting to small but significant changes in the outlook for the American economy, and what that might mean for the cost of borrowing. >The stock market sell-off accelerated on Friday when the US Labour Department released employment numbers which showed stronger growth in wages than was anticipated. >If salaries rise, the expectation is that people will spend more and push inflation higher. >To keep that under control, America's central bank will need to raise interest rates, which is what has spooked investors who were expecting the US Federal Reserve to increase rates only two or three times this year. >They now predict there may be a few more interest rate rises on the horizon. >Monday's sell-off was driven by firms moving to sell stocks to put more money into assets such as bonds which benefit from higher rates, says Erin Gibbs, portfolio manager for S&P Global Market Intelligence. ...
- mtanski 9y ago
  >If salaries rise, the expectation is that people will spend more and push inflation higher. Sure sucks to be a worker. When your salary rises your real gains will be inflated away.
  - vkou 9y ago
    If salaries aren't coming out of investor profits, they have to come out of the cost of goods. The only way workers can win is: 1. Productivity gains make goods easier to make. 2. A bigger share of investor profits get redistributed to workers, be it through taxes, pension fund investments, co-ops. #2 will not be happening anytime soon.
    - eli_gottlieb 9y ago
      >2. A bigger share of investor profits get redistributed to workers, be it through taxes, pension fund investments, co-ops. >#2 will not be happening anytime soon. That sound you hear in the distance is a recital of the Internationale.
    - Retric 9y ago
      #2 happens every time unemployment drops. Yes higher worker pay increases inflation, but it's far from 1:1.
    - sokoloff 9y ago
      [Some] Workers can individually win by forcing themselves to spend less than they earn and investing the surplus. In other words, another way that workers can win is by becoming investors/owners.
      - vkou 9y ago
        That's a great idea. Let's all quit our day jobs, and buy into the S&P 500. At the end of the day, someone has to 'waste' money, in order for companies to earn money. A quarter saved is a quarter that doesn't end up on a revenue sheet.
longerthoughts 9y ago
>This is the kind of reporting you expect from tabloids. Unfortunately this is the kind of reporting I've come to expect from everyone. I can't necessarily blame them - their job is getting more views than the other guy and "Dow Has Bad Day" doesn't attract as many viewers as "DOW HAS WORST DAY EVER". At the end of the day it wasn't a lie, it was just going with the more interesting stat without regard for whether or not it was the most informative for readers. I wish it wasn't so, but we can't expect better without changing the incentives.
Brockenstein 9y ago
You know, I get the sentiment of these sorts of posts. But it doesn't really seem to matter at which point in history you think is the golden age of journalism, they were still selling the news and that often meant sensationalist headlines on the front page fairly often to grab attention and pull readers in. This is not a new thing on any level. You can quibble that news stories were "less" sensationalist in the past, but that's very debatable. It's not as if anyone in this thread from 2018 can rattle off the ten headlines from 1918 or pretty much any year they didn't live through. So I would take any appraisal's of today's news compared to the past without some hard data to back it up with a few grains of salt. I'm of the mind the more things change, the more they stay the same as far as this subject goes.

craftyguy 9y ago

You're silly if you just look at one day point/percentage drops. I'm not saying we're in for another recession, but many of the other events in the table you linked are actually part of a cluster of big drops, spread over several days. There was a ~600pt drop last Friday. It'll be fun to see what the rest of the week is like!

totalZero 9y ago
Do you not agree that relative moves (%) are more useful in characterizing the significance of a selloff?
- roenxi 9y ago
  Percentages are important, but one day movements are not. I think GPs point went to this logic: comparing one-day moves is irrelevant once we have, say, weekly or annual data. I think this movement is very interesting, but only because I expect more of the same and/or a distinct lack of recovery. If a 5% one-day move is really it then I don't care. I've never paid any special interest when the market rises by 5%. Markets go up and down.
  - totalZero 9y ago
    Perhaps it would alter your perception to know that many large derivatives are valued using end-of-day prices, or even intraday prices (as is the case with one-touch options), and that the volume of trading is generally highest (and thus allows the most liquidity for hedging) at the opening and closing moments of the trading day. Not to mention that the significance of a variance injection is usually a function of its timescale. I want to point out that market mechanics are vastly different when individual daily moves are higher, even if weekly moves are identical. In other words, there is a path dependency. Stop orders get triggered as a result of price action. The price of option products tends to increase in high-volatility moments. Day traders and market makers have intraday losses that alter the way they trade, both psychologically and according to the rules of their firms. Price discovery becomes more difficult, which makes market access more expensive. The fundamentals of companies may not change directly, but the cost of doing business changes for financial companies, and that can affect other companies on a larger timescale. For example, a media company that does stock buybacks via accelerated share repurchase agreements will have a fundamentally different deal profile if it expects volatility to be higher, because these agreements often include terms for cancellation if the stock dips beyond a particular price. Highly volatile markets can also affect companies' ability to access money by borrowing from banks or selling financial assets. So, even on a longer-term horizon, higher daily volatility makes the financial regime inherently different, even if weekly volatility remains unchanged. If you relegate big daily moves to the realm of "I don't care," you prevent yourself from perceiving some of those differences, and ultimately only harm yourself -- the rest of the market, by and large, understands that big daily moves have an impact on the market even if they are reversed shortly thereafter.

thansz 9y ago

This. You have to take a look at percentage market moves. The markets have been moving up for a long time. A 1000 point drop when the market is at 26,000 is not the same as a 1000 point drop when the market is at 16,000.

schoen 9y ago
The Dow 10K (let alone 20K) still takes getting used to for me -- I remember figures around 4000 in my childhood. ... at which point a 1000-point drop would have been seen as much more significant. Edit: although apparently I'm remembering a slightly later era than I thought.

starpilot 9y ago

It looks like it might be in the top 100 though. Considering these are changes per day, and the chart covers around 100 years or 25,000 trading days, this puts it in the top 0.4% of largest percentage daily losses. So, it does appear to be a significant losing day if 99.6% of such days are smaller in magnitude.

quickthrower2 9y ago
About 0.3% of days are my birthday.
- jerkstate 9y ago
  well, happy birthday to you then!
- hamandcheese 9y ago
  Despite the downvotes, the point seems valid on its surface. We should expect a losing day this bad or worse more frequently than once per year, which doesn’t sound that scary. On the other hand, I wouldn’t expect losing days to be evenly distributed (in the short to medium term at least) but rather clumped together.
Obi_Juan_Kenobi 9y ago
It's also significant given the overall state of the market. http://www.macrotrends.net/1319/dow-jones-100-year-historical-chart http://www.macrotrends.net/1319/dow-jones-100-year-historica... http://www.multpl.com/inflation-adjusted-s-p-500 http://www.multpl.com/inflation-adjusted-s-p-500 Even accounting for an overall growth trend (e.g. real GDP) the market is looking quite overbought and prepared for a major crash. Signs of weakness like this are significant. It certainly doesn't guarantee a crash, but it's newsworthy IMO. Especially in the context of a decade of QE and the fed raising rates.
Retric 9y ago
Dow has more up days than down. So among down days this is closer to 1% than 0.4%.
9y ago

wrs 9y ago

As an index bizarrely weighted by price per share and a somewhat arbitrary divisor, the DJIA isn't what you'd choose to report on in the first place if you cared about anything but sentiment.

kaycebasques 9y ago
It's also a small basket of 30 US companies. A lot of big, important companies across different industries, sure. But it's just another aspect to consider.

pfarnsworth 9y ago

The only ones that matter are the ones that occur after roughly 1995. Most people weren't in mutual funds or stocks the way they are today. When the stock market dropped 50% in 2008/2009, so many people in retirement age were ruined because their retirement money was in the markets. A greater number of people's financial health is based on the stock market in 2018 than it ever did in the 1930s or 40s. In 1987, when the markets crashed 25%, it was interesting and scary, but if that happens today, millions of Americans need to push back their retirement by a dozen years. It's much more meaningful today because so many more people are affected by it. One of the great feats of social engineering that Wall Street has done in the several decades is convincing regular people that they should have their money in the stock market. That lets them make billions of dollars "taking care of" their money without any personal risk themselves.

kaycebasques 9y ago
> When the stock market dropped 50% in 2008/2009, so many people in retirement age were ruined because their retirement money was in the markets. Interesting perspective on why central bankers have seemed so complacent about high stock valuations. I've also heard commentaries that the wealth effect was one of the tactics used to drag the US out of the Great Recession. https://en.wikipedia.org/wiki/Wealth_effect https://en.wikipedia.org/wiki/Wealth_effect
111_1_111 9y ago
Out of curiousity, where do you think people should put their money if not the stock market?
gaius 9y ago
One of the great feats of social engineering that Wall Street has done in the several decades is convincing regular people that they should have their money in the stock market. Ironically you could call this “owning the means of production”
- draw_down 9y ago
  Nope.