Markets closed down on Wall Street: DJI -1.15% SP500 -1.12% Nasdaq -1.25% Gold -1.9% Oil -3.47%.
Japan (NYSE:EWJ) is the center of attention as the nuclear reactors in Fukushima may completely meltdown. Markets are not sure how to digest Japan’s disaster, but they made a decent recovery after starting the day twice as bad.
Today’s markets dropped because:
1) Japan (NYSE:EWJ) is not over. Wall Street hates unknowns. So long as Japan continues to change on a day to day basis, a certain crop of investors will sell first and ask questions later. A look at charts of the Nikkei after the Great Hanshin earthquake in 1995 shows investors may be taking the right path as markets sold off for 5.5 months. But investors are overlooking the incredible economic catalyst of rebuilding one of the world’s great countries. You can sell General Electric (NYSE:GE) indiscriminately today, but you better believe they will be there under contract to rebuild. We’ll have to wait to see if markets settle down tomorrow or whether volatility (NYSE:VXX) is back.
2) Libya and Saudi Arabia are still unstable. Remember the Middle Eastern Crisis? It’s not over. Libya is engaged in heavy battle not far from one of the most important ports for Oil (NYSE:USO) transport. And Saudi Arabia still has problems with protests, rage, and Bahrain. Paradoxically, Oil got slid almost 3.5%. Investors even disposed of Oil & Gas giants like Exxon Mobil (NYSE:XOM) even amidst an upgrade by Goldman Sachs (NYSE:GS). Don’t Miss: 3 Defensive ETFs to Hedge a Market Pullback.
3) The Fed is holding rates steady. No surprise here. The FOMC is painted into a corner if economic activity takes a hit from higher gas prices and a slowdown in Japan. That could keep mortgage rates low enough for the real estate market (NYSE:IYR) to stabilize. Add a reasonable National Association of Home Builders report, and Home Building stocks (NYSE:XHB) such as Toll Brothers, Inc. (NYSE:TOL) and D.R. Horton, Inc. (NYSE:DHI) exploded to the upside.
Now that you’re in the know, good luck using logic or reason to predict tomorrow’s market activity.