From Wolf Richter at wolfstreet.com:
A lot of air underneath Friday’s close.
Wall Street soothsayers were salivating Friday morning. The employment report for December tickled them. For days, they’d pronounced that the bloodletting was a buying opportunity, that stocks had dipped enough, that it was time to jump back in with both feet.
So Friday morning, that’s what folks, hedge funds, and HFT algos did: they shook off the unpleasantries of the year so far, and shortly after trading started, the S&P 500 was up 0.9%.
But then everything came unglued. The three major indices fell about 1% for the day. It ended a week to remember: the Dow plunged over 6%, the S&P 500 nearly 6%, and the Nasdaq 7.3%. As MarketWatch titled it so eloquently: “US stocks see worst opening week ever.”
There were some standouts.
Twitter, which lost $1.3 billion over the past three years and which doesn’t know what to do next, saw its shares fall to $19.98, below $20 for the first time ever.
That’s 23% below its IPO price of $26. But that’s not where trading started in November 2013, when QE3 Infinity was still in full swing and when all things were possible, no matter how impossible. Behind closed doors, Wall Street ran up the price. The first trade was at $45.10. Twitter instantly became a Wall Street hero. By December 30, 2013, shares pierced the $70 mark. On Friday, Twitter was 56% below its first-trade price and 71% below its peak.
Among the other standouts was the Container Store. on Friday, it crashed 41% in one fell swoop to $4.21. Same pattern as Twitter and many of other Wall Street heroes: IPO price of $18 in October 2013. First trade at $36. The stock soared to $47.07 in two months. Now it’s 88% below its first trade and 91% below its peak [read… This is What Happens after PE Firms Get Through with a Retailer].
This chart by Doug Short of Advisor Perspectives shows the indignities the S&P 500 suffered over the past five days in hourly increments. Only Tuesday was flat-ish. The rest was bloodletting:
This leaves the S&P 500 9.8% below its record close on May 21, 2015, flirting with a “correction.” The Dow and the Nasdaq, down 10.7% and 11.0% respectively, are already in a correction. On a 12-month basis, all of them are in the red.
To continue reading: How Could Stock Markets Croak Like This First thing in 2016?
