It's not as if investors haven't seen the Dow fall below the 10,000 mark before. In truth, watching the Dow fall is almost as common as seeing it rain. And so Tuesday, another cloud rolled through and the Dow fell into the 9,800 range before closing at 10,043.75 -- down 22.82.
But the fear that has rolled through in the past month is expected to remain. Each day, we're likely to wonder, is this an ordinary spring storm, or the start of the next hurricane that will cut into every 401(k) and take down the U.S. economic recovery with it?
"People do have, I think, a heightened sensitivity to the risk of unexpected things," said Pat Dorsey, director of equity research for Morningstar. Investors, he said, are seeing shadows around every corner.
Edginess, I'd say, would be a natural reaction. After all, it was not that long ago -- in the fall of 2008 -- that we saw the Dow's collapse. In early September of that year, it had been chugging along at 11,500 but by November was around 7,500 -- a 35 percent drop in a little more than two months.
The Dow then regained footing, only to crash to 6,547.05 on March 9, 2009.
ADVERTISEMENT
So if you are feeling like a basket of nerves now, well, who wouldn't be?
"The drumbeat of negativity is getting louder," wrote Ed Yardeni, president and chief investment strategist for Yardeni Research. He noted in his morning report on Tuesday that last week he visited a major account and handed out a sheet listing "A Dozen Reasons Not to Panic."
A client reacted by saying that he would tape it to the window ledge to read before jumping, Yardeni said. Not exactly a soothing thought.
Market experts say there are reasons to keep an eye on conditions, but not to panic.
Donald Grimes, senior research specialist for the Institute for Research on Labor, Employment and the Economy at the University of Michigan, said he does not see a strong risk of the U.S. economy falling into a second recession.
"People are beginning to believe things are turning around," Grimes said.
Forecasters, for example, see continued improvement for car and truck sales in 2010 through 2012.
And some point to the Dow's latest pullback as logical following an incredible ride up -- climbing 70% from March 2009 to close at 11,205 April 26.
ADVERTISEMENT
"I'm really inclined to look at this as just a correction," said Josh Peters, equities strategist for Morningstar. "I think the American economy is still on a recovery track."
Tony Dong, vice chairman of Munder Capital Management in Birmingham, noted that many of the risks that Wall Street is focusing on now -- such as debt troubles in Greece -- have been around for several months. But traders did not dwell on such issues when the market had momentum.
Dong said investors should realize that the stock market is likely to have more volatile days ahead for a few years as the financial crisis and Europe's debt troubles unfold.
"It's unreasonable for us to think we can anticipate what's going to happen," Dong said.
