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2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

Boo! Stocks end October on massive sell-off

UPDATED at 4:30 p.m.

You want to get scared for Halloween? How's this: Yesterday's big stock market gains have been more than wiped out today, as traders engaged in a massive sell-off.

The Dow closed down 2.5 percent, the broader S&P 500 closed down 2.8 percent and the tech-heavy Nasdaq closed down 2.6 percent. All 30 Dow components were down on the day. Today marked the close of the worst week for the Nasdaq since March. Overall, the markets were down for a second straight week.

Today's plunge comes following Thursday's run-up, the biggest one-day spike since mid-July.

Financial stocks lead today's decline, with shares of Citigroup (down 5 percent), Bank of America (down 7 percent), Wells Fargo (down 3 percent), Goldman Sachs (down nearly 5 percent) and J.P. Morgan Chase & Co. (down nearly 6 percent) among the big losers today. CNBC reported that 78 of the 79 stocks in the financial sector are down today.

Just as yesterday's surprise 3.5 percent rise in third-quarter U.S. GDP pushed stocks higher, flagging consumer confidence today has killed the markets.

September personal spending dropped 0.5 percent, the Labor Department said this morning, as consumers closed their wallets after the cash-for-clunkers program ended.

Also, October consumer confidence dropped from September to October, the Reuters/University of Michigan consumer sentiment index said today, dipping from 73.5 to 70.6. Even though that number was in line with expectations, traders were not impressed and dumped stocks.

Accordingly, the volatility index (VIX), sometimes known as the "fear index," has jumped today to a high not seen in nearly four months.

The VIX is a measure of the price volatility of stock options for shares that trade on the S&P 500.

Traders use options to hedge against future losses. When traders see a volatile market -- a 5 percent jump one day, a 3 percent drop the next -- the price of options rises and the VIX climbs.

When the markets do not fluctuate as much, the VIX drops, as traders see smoother waters ahead and start to feel good again about stocks.

Traders like the VIX to be below 30. Today, it spiked 25 percent to rise above 30, as traders evidently see stock price volatility ahead.

Finally, there were some technical factors at play today. It was the last day of the federal fiscal year and the last day of the month, when fund managers dump dog stocks to make their numbers look better for investors.

-- Frank Ahrens
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By Frank Ahrens  |  October 30, 2009; 4:30 PM ET
Categories:  The Ticker  | Tags: Bank of America, Citigroup, Goldman Sachs, J.P. Morgan Chase, volatility index  
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Comments

This sell off is overdone, as was yesterday's buying spree. Hopefully, cooler heads will soon prevail.

Posted by: RadicalGlove | October 30, 2009 3:14 PM | Report abuse

The crooks trading on Wall street are a joke.

Any excuse to invest with the intent of driving the market(s) up, and then drive them down by selling off for profits is nothing but a highly sophisticated PONZI scheme.

Posted by: lcarter0311 | October 30, 2009 3:17 PM | Report abuse

The news yesterday was political BS. There is no economic recovery just a sick sick economy in all stages just proped up by BS
Gov bailouts. We are in a sorry state of affairs.

Posted by: affirmativeactionpresident | October 30, 2009 3:32 PM | Report abuse

Could it be that an economy where jobs are shipped overseas, mass layoffs where millions are unemployed and those with jobs are expected to do the work of five regular employees isn't sustainable. Our economy is built are consumerism - well if there's no employment then there can't be consumerism. But as always companies are putting the cart before the horse by wanting big profits before hiring. One day all these S&P 500 companies will wake up and realize that without an active and viberant workforce they have no businesses.

Posted by: dre7861 | October 30, 2009 3:33 PM | Report abuse

Wall Street moron's have been listening to the idiots that compose the "economic teams" of this and the past Administrations. The fact is, "free trade", at least if it means outsourcing and massive job losses, will utterly destroy this country. The real, honest-to-god-unmanipulated unemployment numbers are above 20%. The Democrat know this. So does Obama. So do the Republican's. But, consumers, especially know this. We also understand that we have gutted our manufacturing capacity and thrown away an technological advantage we once enjoyed over the rest of the world when we allowed Microsoft and IBM and all of those other hi-tech companies to fire their U.S. workers and replace them with 4.5 million dirt cheap Indian and CHinese and Russian H1-B and L-1 visa guest workers. SInce around 75 to 80% of our economy depends upon consumer spending and consumers are rightfully frightened and angry and filled with loathing and outright hatred for their government, for corporations, for banks, and for the whole investor-leadership class. The economy WILL TANK. It's going to get a lot worse and the blind fools in New York and Washington, as usual, are the last to understand that.

Posted by: mibrooks27 | October 30, 2009 3:36 PM | Report abuse

The banks caused this depression, Obama gave them free tax payers money & they invested in Wall Street, the stock market showed a phony profit, stocks went up, now the banks are selling & making a killing on the inflated value of their stocks. America's biggest threat isn't from Muslim terrorists, it's from the big BANKS ... they're the true terrorists & Obama is in bed with them.

Posted by: wasaUFO | October 30, 2009 3:38 PM | Report abuse

Wellllllllllllllllllllll Ollie that certainly took care of any 401(k) plans. Once the actual numbers are in which discount the clunker deal and the housing spike and the fact that almost anyone who can be let go or laid off has been the next quarter reports should scare you even more. Unemployment has been at 12% for at least 2 quarters it is the Government cooking the numbers that have kept the magic 10% from being admitted. Obama needs to stay home rather than any more vacations. Serious days are here. Try getting a job if you are over 55. Not possible.

Posted by: KBlit | October 30, 2009 3:41 PM | Report abuse

What's the Messiah to do? Perhaps he can sit on it for a few months, much like Afghanistan!!

Posted by: cschotta1 | October 30, 2009 3:41 PM | Report abuse

The consumer is cooked - for the next decade at least. We have an aging baby-boomer group, with no money, getting close to retirement. US Citizens had negative savings for many years, and only now has the US savings rate pushed back above zero. To be anywhere where normal, it needs to be up near 7-10%. So who will be spending?

And if you think they Gov't will tax and spend us to prosperity to make up that difference, you are a fool.

Posted by: pgr88 | October 30, 2009 3:55 PM | Report abuse

The investor psychology now is all over the map. The GDP numbers sent the market up, tight consumer wallets sent it down, even as Asian markets rallied overnight Eastern Time driven by the rise in the U.S. market on Thursday. Despite the gains of the past several months, it is going to be a bumpy ride for some time to come, as everyone is reading the tea leaves in their own fashion. Combine that with programmed trading and you get bad, bad motion sickness.

Posted by: jhpurdy | October 30, 2009 3:56 PM | Report abuse

People need to move there money elsewhere. This is just a PONZI scam for the rich and greedy and the middleclass that think otherwise are fools. I have never seen investors play the fear card like they do on Wall Street. All you have to do is start a rumor and invest in that rumor and viola! Your off to the rip off race! This is what our country is now relying on to prop up our economy? America, the stupid! This country has turned into morons!

Posted by: rbraun2000 | October 30, 2009 3:57 PM | Report abuse

True. No jobs, no decent wages, no pensions, no return on 401Ks, but PLENTY of bonuses for the s o b s on Wall Street and in Greenwich.

What was that about CHANGE, Obama? Oh, your Economic Advisor praises Wall Street bonuses, Chelsea marries a Hedge Funder, Rahmbo the FoulMouthed is an Investment Banker, and your sainted Grandma was a Banker?

Meanwhile, the Middle Class drowns and disappears while the pseudo-elite of a Rigged Game send Muffy off to Harvard and talk about the "poor" whites who "don't vote in their economic self-interest."

Well, guess what, Big O, Congress doesn't VOTE in OUR self-interest anymore than you did when you got earmarks and got Michelle and "the Ax" a 300K a year no-show job.

And your loyal Congressional Black Caucus, and Democratic Congress are just as corrupt. The Republicans at least are HONEST about helping business. Those sorry s o b s are starting to look good by comparison.

No jobs, no wages for the Middle Class, no future. Get it?

Posted by: georgieporgie2 | October 30, 2009 3:59 PM | Report abuse

I'd get better odds at the Blackjack tables in Vegas.

Posted by: sasquatchbigfoot | October 30, 2009 4:00 PM | Report abuse

With the market up over 30% since January, the profit taking is long overdue. It may have been helped along by the bi-polar business reporting by this paper and others but people should have figured it would happen before the end of the year.

Three days ago the story was that 'experts' thought the economy would rebound and unemployment would ease. One day later, new homes sales were down and that factor reportedly drove the market decline. Yesterday the news was that the economy 'roared back' in the 3rd quarter with a 3.5 GDP which allegedly drove the market up, today, consumer sales are down and the market nose dives. Media driven hype and none of the media have any idea what dynamics are in play.

With consumer savings at an all time high and lots of cash on the sidelines, panic is something that should not govern. Most of the buying and selling will correctly be found to have been caused by pension funds, mutual find managers adjusting portfolios, raising cash etc-but that news will not show up for two months.

Posted by: rrau22 | October 30, 2009 4:08 PM | Report abuse

HELLO! Have We-the-PEOPLE gotten sick & tired yet? Are the American Citizens Vomiting? Yesterday we listed on C-Span to the "Future of Fannie Mae and Freddie Mac". How utterly disturbing, rediculous, and sickening!! We listened to many of these so-called experts, economists, and global banking gurus. They think that YOU, the AMERICAN PEOPLE are so stupid and naive. The Criminals whom caused the Economic Terrorist CRISIS, - created $400 Trillion in phoney Derivatives, AND Ruined/Ripped-Off the Mortgage Industry!! And People would You believe that none of these Criminals are in PRISON yet!! And even more disturbing is that what we thought was suppose to be OUR CONGRESS, is blatantly supporting and Bailing-Out these same Globalist TRAITORS!! "Sickening" to the Max! - Please tell us all, 'why do the American People put up with this CRAP'??!! - Because they are sheep, and in-different, and have forgotten that WE-the-PEOPLE of this Great United States of America own this Nation, - "NOT" the BANKS, GLOBAL CORPS, or Insurance $rapists!! - If CONGRESS will not support and work for US, there employers, then thay need Fired & Prosecuted NOW!!! "As We here often have said, and Kucinich recently uttered,-- 'We-the-Corporations' does NOT exist in Our CONSTITUTION!!! - Repeal the Federal Reserve Act; Abolish Criminal Fractional Reserve Banking; pay-off the DEBT with U.S. Bonds; enact a Statute for NO-more-DEBT; return to regulated fair interest rates; - and get rid of these Globalist Criminal Bankers whom produce NO goods or products at all! They just use & manipulate OUR $MONEY, and charge usurious immoral $Interest against us for use of Our own Money!!! CITIZENS, this is rediculous & stupid!! When will We start being AMERICANS again?! Our Founding Fathers would be so ashamed and humiliated that the PATRIOT CITIZENRY are standing by and allowing Our Great Nation to be destroyed, and the People put into $DEBT-INTEREST Slavery by the private so-called Federal Reserve!!!! "and without-firing-a-shot"!!!

Posted by: jward52 | October 30, 2009 4:25 PM | Report abuse

The same people who are telling us all is fine are the same people who got us into this mess.The market runup was nothing more than a bear market ralley.Same thing happened in the early '30's.History reapeats because human nature doesnt change

Posted by: hyroller56 | October 30, 2009 4:40 PM | Report abuse

But barry said the stimulus is working. He lied again?

Posted by: Atenora | October 30, 2009 4:58 PM | Report abuse

I don't understand, just last week the administration said the recession was over? What is going on here?

The current government is populated by incompetents we need to get rid of all of them and start over. Remember this in November.

Posted by: staterighter | October 30, 2009 5:04 PM | Report abuse

liar in chief says everything is wonderful,why worry? this guy is an incompetent political hack who will be compensated greatly after his four yrs as chief criminal

Posted by: pofinpa | October 30, 2009 5:08 PM | Report abuse

The NYC hymies want to steal every penny you have worked for.The market is a joke.

Posted by: hyroller56 | October 30, 2009 5:10 PM | Report abuse

I thought the cash-for-clunkers requirement to have owned a qualifying vehicle for at least six months was unfair. If someone owned a clunker but didn't want to buy a new car, then he or she should have been permitted to sell their car to someone who wanted to then trade it in through the cash-for-clunkers program. As it was, the program benefitted the auto sellers more than the public. Any clunker off the road benefits the public, but a clunker that is traded in for new benefited the auto sellers.

Posted by: blasmaic | October 30, 2009 5:11 PM | Report abuse

I see there are a number of people in complete denial on this page. They want to blame the President for the shape we are in.

It took many years to get to where we are today. This process was sped up over the last eight, when we saw tax and corporate laws changed enabling greed to rule and millions of good paying jobs sent overseas in the name of corporate greed.

Oh, with the Global Economy we were going to get lower prices, but with CEOs giving them 25% a year increases for the last decade or so, while workers got 3.5% and now massive unemployment most Americans don't have the disposable income to benefit from those lower priced and often inferior goods and services.

The first thing we need to do is close down K Street, stop the finger pointing and start rebuilding America rather than let the corporations who put us in this mess continue to write our laws and buy the votes of our Congress.

The second thing we need to do is get our of the world policeman business and bring our troops home. I'm sick to hear we are paying $400 a gallon for gas in Afghanistan. I'm sick that we've spent over a trillion on these two wars with no success, and without benefit to the American people.

The third thing we need to do is go to single payer, rather than play these games around the edges. Our country can't afford to compete with other countries when our health care is taking more than 17% of our GDP, and the rest of the industrialized world is paying nearly half that amount.

The fourth thing we need to do is put in place progressive tax code that will put an end to the greed fest that has only gotten worse over the last 30 years, and gone out of control. We were told that giving the rich even more money would mean economic prosperity. Well, this is where it has taken us. in the toilet.

The fifth thing we need to do is go to Basel II, and implement safeguards for investors, the people. We need to make U.S. corporations behave in the interest of America or take away their ability to steal 401k money for themselves.

There's more we could do, but I'm tired of typing.

Posted by: wayoffbaseguy | October 30, 2009 5:16 PM | Report abuse

But I thought the WaPo said yesterday that the recession was over!

Posted by: waterfrontproperty | October 30, 2009 5:25 PM | Report abuse

Anyone want to wager 6000 after Christmas?

Posted by: dhagen1 | October 30, 2009 5:27 PM | Report abuse

The Gov't lies. The shills on CNBC suck up to Goldman Sachs. The rich get richer. The poor get children.

Posted by: thecanimalshusband | October 30, 2009 5:31 PM | Report abuse

As one who is scrounging for a job, I can't help but feel Schadenfreude every time the stock market goes down by a large percentage.

Posted by: pjs1965 | October 30, 2009 6:34 PM | Report abuse

All this micromanaging from Washington is curbing any growth in the private sector. Hitching the welfare state on a growing economy isn't a victimless crime. It ain't over yet.

Posted by: NoWeCant | October 30, 2009 6:39 PM | Report abuse

Change you can believe in!

When will the WaPo start to think!

Posted by: BorisB1 | October 30, 2009 7:09 PM | Report abuse

The volatility of the market in the last couple of days is more a reflection of different views of the market than specific news items. There are a large number of people sitting with large paper profits. The question is how many of them want to book them. The other instability is buying stocks on credit that is linked to the changing value in the dollar. The last couple of weeks could easily turn out to be just another normal correction in an up trend. But they also could be the start of a major down trend. That trend would be driven by people starting to see their paper profits disappear and possibly by the need to cover positions in the dollar market. A rush to the exits could feed on itself and cause a quick substantial decline. The rapid rise over the last few months has never tested the conviction of those driving the market higher with their stock purchases. Until we see a significant correction, we will not know whether their purchases are a short term speculation or a longer term committment.

Posted by: dnjake | October 30, 2009 7:22 PM | Report abuse

Well it looks like the masses have taken my advice and started pulling there money out of the "too big to fail" banks.

This is the only way to send the message to the CEO's is that Americans are fed up with their fiscal irresponsibility of tax payers money. We need to hit them in their pocketbook to open their eyes, protest either verbally or in the front of their offices fazes them not!

PULL YOUR MONEY OUT OF THE "TOO BIG TO FAIL", I AM PROMOTING AND ASKING FOR ALL CITIZENS TO MAKE A RUN ON THESE BANKS AND FINANCIAL INSTITUTIONS! WE CAN MAKE THEM FAIL! DO IT NOW!

Posted by: victorlove1 | October 30, 2009 7:59 PM | Report abuse

Maybe the markets are responding to Obama's recent lies about job growth?

Posted by: liberalsareblind | October 30, 2009 8:02 PM | Report abuse

Interesting - the market goes up for the last six months and not a conservative to be found on those news reports....now the market goes down for few days and suddenly it's a disaster.

Posted by: mikem1 | October 30, 2009 8:33 PM | Report abuse

Gee.

I wonder what the stock market could be worried about?

It couldn't be the reality that Obama and the Democrats have this country in debt to the tune of eleven trillion dollars and want to borrow another two trillion to finance an idealogically founded desire for government run health care which unfortunaly also cuts Medicare to the bone could it?

Nah.... They just upset asbout the Washington Redskins.

Posted by: BruceMcDougall | October 30, 2009 8:36 PM | Report abuse

But how can this be? I thought the recession was over. Oh, that's right, that was yesterday's headline.

Posted by: c0lnag0 | October 30, 2009 8:47 PM | Report abuse

The Stock Market is troubled by Obama and the Democratic Party's basic philosophy which is:


Charge it.

Posted by: BruceMcDougall | October 30, 2009 8:53 PM | Report abuse

You see!

Our biased media was right!

Obama for president!

Posted by: BruceMcDougall | October 30, 2009 8:55 PM | Report abuse

Want to be rich this time next year? All you have to do is sell short and buy puts. On just about anything. You can make FAR more money with the market going down than you ever will with it going up. And THIS market is done for. DOW 4800-5200 within 6 months. Mark my word.

Posted by: PercyKution | October 30, 2009 9:52 PM | Report abuse

At least we are not eating horses, not that we ever would, thank God. I'm Country Carl the Artist and Advocate for additional unemployment benefits on Unemployment-Gone-Mad dot com. In town the pawn shops are the only ones mining gold. These New Depression Blues times can drag a good man to the bottle. As we wait for an unemployment extension, thousands more become dumpster divers, tent pitchers and street corner beggars. Even pets are becoming a burden for tearful owners and freaking out when they become abandon. Senate pass the unemployment extension bill.....Country Carl

Posted by: NewDepressionBlues | October 31, 2009 11:29 PM | Report abuse

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