Buffalo,NY (WBEN) Like an amusement park ride, it was a wild swing to start the week on Wall Street Monday. At midday, the Dow was down more than 1,000 points. It ended the day with a 99 point gain. The Nasdaq and S&P 500 had similar swings, ending in positive territory.
Ed Hutton of Niagara University says investors should have known about the Federal Reserve's upcoming moves. "The Federal Reserve has been withdrawing a lot of liquidity that's been pumping up the markets for the past couple of years. It's not a surprise for people, it's just a matter of timing," says Hutton. "I think a lot of investors have realized the Fed is serious about cutting back, reducing their bond purchases and everybody expects interest rate rises, and as a result, people are cutting back on stocks."
Hutton says investors are also looking at the situation between Russia and Ukraine. "Anytime you have a situation like this where the market is hesitant about risk, there are a lot of things that can set the market off. There is a lot of tension about the Ukraine," notes Hutton.
As we neared the close, there was a huge swing toward positive territory. "All 3 indices were down in correction mode, and generally the market has to close 10 percent below the high, and investors said not today," says Greg Merkle of FSC Securities. "They came in and bought." The Dow had a nearly 1,200 point swing Monday. "Traders get to a point where they have programs out there, and if there were some traders who felt stocks were too far down, they come in and buy them."
Merkle says some are guessing how much interest rates will go up. "The Federal Reserve will be speaking, and you have guesses of 3 times, 5 times. You might see a 50 basis point increase Wednesday," says Merkle. Another concern was triple witching, and that along with the Fed and the tension between Russia and Ukraine hit the market quickly.
Merkle says "we're not at the bottom, but boy, this was a really nice move back up and shows some strength."
Hutton notes the market is already in a correction. "Market correction is typically defined as 10 percent decline in the market, and if we measure that against the high earlier this month, we're in a market correction at least at the S&P 500 and certainly a correction with Nasdaq," notes Hutton.
The S&P 500 rose 12.19 points to 4,410.13. The Nasdaq gained 86.21 points to 13,855.13.
