Stock Market Swoon Sparks Worries of Flash Crash
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Péter Mács/iStock/Thinkstock(NEW YORK) — Stocks took a beating Friday as investors worried over Greece’s ability to pay its debt and possibly exit the Eurozone, China’s change in stock market regulations and disappointing corporate earnings from Amex and General Electric.
The Dow Jones Industrial Average closed at 17,826.30 on Friday, down 279.47 from its open.
The Nasdaq fell by 75.98 to close under the 5,000 mark at 4,931.81. The S&P 500 fell by 23.81, finishing the session at 2,081.18.
Here’s what weighed on the market:
• GREECE: Creditors are still struggling to come up with a plan to keep Greece from defaulting on its debt and investors fear the country will struggle to make payments to the International Monetary Fund due next month if it fails to reach a deal.
• CHINA’S REGULATION: Another catalyst triggering the sell-off on Friday was stock market regulation from China. After the markets close in Asia, Chinese financial regulators issued warnings about that country’s soaring stock market that has more than doubled in the last year. Regulators said they will tighten rules on borrowing to buy stocks.
WHAT ALL THIS MEANS FOR YOUR 401(K):
After years of rallying it’s surprising the nervousness of the market when its faced with bad news.
Sebastien Galy, Sr., FX strategist for Societe Generale points out, “It tells you that once investors are trading and want to get out of their positions they won’t be able to, which could cause a large flash crash.”
The bottom line if your 401(k) or investments are overly extended in risk you should take the time now to pare that back.
Galy says it’s only a matter of time before a major trigger causes a flash crash.
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