HUNTSVILLE, Ala. — Stocks went into free fall on Monday, and the Dow plunged almost 1,600 points — easily the biggest point decline in history during a trading day.
Buyers charged back in and limited the damage, but at the closing bell, the Dow was still down 1,175 points, by far its worst closing point decline on record.
The drop amounted to 4.6% — nowhere close to the destruction on Black Monday in 1987 or the financial crisis of 2008. But for investors lulled to sleep by the steady upward climb since Election Day, it was alarming.
"The Dow is just a composite of 30 stocks, the S&P is 500 stocks. It`s a major of how those stocks are done either up or down. They have very little to do with the individual investor," Investment Adviser Gene Pospicil explained.
Pospicil said this is a reminder that markets are volatile. "They don`t go up forever and we heard within the last year the market is up 22 or 24 percent. Everybody claims different reasons for it being up."
He said the numbers went down, because they shot up so fast. "We really shouldn`t be frightened by corrections. The market on average every three or three and a half years will correct 5 to 10 percent."
Pospicil said this record-breaking day shouldn't worry anyone. "If the market were to stay low for a period of time it resets all prices. So know that it's good for the individual investor because it gives them an entry point. What's difficult for the individual investor is trying to trade those ups and downs."
But if you happen to check your 401(k) you will see it's taken a hit. "The level of the S&P and the level of the Dow does affect the level of a mutual fund, that`s what is in your 401(k)," Pospicil said.
He said even though the Dow went on a roller coaster Monday, earnings of U.S. corporations are very good and interest rates are very accommodating.