Wall Street took its worst beating in four years, as a sell off in the Chinese stock market triggered a global stock selling spree and raised fears of a slowdown in the world economy.
"Asia sneezed and we all picked up a global chill," Frederic Dickson, Chief Market Strategist at D.A. Davidson & Company, told CNBC.com. "We're not going to go off of the ledge but tighten up the seatbelts a notch or two because it could be a little bumpy in the next few days. There's still a tremendous cushion of cash out there with most investors waiting for a pullback to put some money to work. We'll see if they come in."
The Dow's 416 point drop was its worst point decline since September 17, 2001, the first trading day after the September 11th disaster. On that day, the Dow dropped 684 points. Today's 3.29% dip was the worst percent decline since March 24, 2003. The S&P 500 lost 3.5%, its worst loss since the day. The Nasdaq fell 3.8%.
"This is a hiccup, well, maybe a slightly louder than normal burp," David Sowerby, Chief Market Analyst at Loomis Sayles, told CNBC.com. "I would deem it a modified correction at 5% and an outright correction at 8%. At this point, I think we're on our way to a modified correction."
Jim Cramer is saying it's time to find something good to buy, and I agree with him, but this is also likely a signal of more economic pain to come -- and a stark illustration of just how big a gorilla China is in the global zoo.
Meanwhile, some analysts are blaming the former Wizard of the Fed, Alan Greenspan, for skunking up the party, for saying the following on Monday:
"When you get this far away from a recession invariably forces build up for the next recession, and indeed we are beginning to see that sign," said Greenspan. "For example in the U.S., profit margins ... have begun to stabilize, which is an early sign we are in the later stages of a cycle."
"While, yes, it is possible we can get a recession in the latter months of 2007, most forecasters are not making that judgment and indeed are projecting forward into 2008 ... with some slowdown
So who's to blame? China or Greenspan? Greenspan or China? Inquiring minds want to know... and when I want to know, there's only one place I go: Addison Wiggin and the guys at The Daily Reckoning. Sign up for their newsletter. It's worth it.
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"[T]he practice of arbitrary imprisonments, have been, in all ages, the favorite and most formidable instruments of tyranny.' Alexander Hamilton, Federalist No. 84, August, 1788
