The ST Index closed today at 2955.91, down by 25.04 points. Gainers/losers stand at 173/409 while 1.077 billion shares were traded.
No surprise for the red ink given that Dow Jones tumbled 358 points to close at 11,453.42 (its lowest finish since Sept. 11, 2006) due to record high oil prices and fresh troubles brewing in the financial, high-tech and automotive industries. S&P 500 slide 38.82 (about 3%) to 1,283.15 and Nasdaq composite fell 3.3% to 2,321.37.
First, the bad news… shares of General Motors sank to their lowest point in more than three decades. Goldman Sachs downgraded U.S. investment banks from “attractive” to “neutral” due to massive losses and prospect of a lengthy recovery. Citigroup was added to its “conviction sell” list.
In the tech sector, technology heavyweights Oracle Corp and BlackBerry maker Research In Motion Ltd led the steep decline with uninspiring forecasts.
Oil futures shot past $140 after the head of OPEC predicted the oil could reach $150 this year and Libya said it may cut oil production. Gasoline prices is guaranteed to increase beyond $4 a gallon which will lead to more expensive goods and services and thus, higher inflation.
With consumers becoming more prudent in spending their money, the economy has entered into a vicious cycle of decline. Though Gross Domestic Product (GDP) grew at 1% (slight improvement from earlier estimates), it still indicates weak consumption/production.
Investors have now adopted a bear market mentality, negative news send them into a frenzy while positive news are shrugged aside. There is no kidding ourselves with Dow and S&P approaching the prolonged 20 percent decline since last year that symbolizes a bear market.
The bear’s rampage means that promising figures from the National Association of Realtors were ignored. Its report showed that existing homes sales edged up in May (for only the second time in the past 10 months) but a real estate revival by this year is considered too optimistic. The Federal Reserve’s decision to hold interest rates was given the thumbs down by the investment community.
I believe the stock market is factoring in all the necessary adjustments – lower second-quarter earnings, prolonged housing slump, credit crisis and the soaring price of oil. If there is more bloodletting on Wall Street tonight, I expect Black Monday to descend on the SGX next week.