Why did stocks fall today? There was a lot of negative news putting pressure on stocks across the board. The reason why the stock market is down is because of the stock market news that came out this week, including Amazon being sued by the FTC for forming a monopoly, President Biden joining the UAW strike, and the looming government shutdown. The latest stock market analysis shows the stock market crash today may just be the beginning. The stock market today fell, cause multiple stocks to close deep in bearish territory. This video explains today’s stock market news simply in a stock market for beginners friendly way.
The stock market fell significantly on Tuesday with the Dow down over 400 points and the major indices all down over 1%. So why did the stock market fall on Tuesday? Will the stock market continue to fall? And when will it turn around and start going back up? We’ll also talk about why crypto fell. The reasons why the stock market fell are numerous. And I’m going to give you all of the reasons.
It all started with the FTC along with 17 states suing Amazon, alleging illegal online marketplace monopoly. Now this could be a major problem for Amazon. It’s possible that Amazon might get broken up into smaller companies. And if that were to happen, it would be the death of Amazon. As a result of this, Amazon stock was down over 4% today. Now Amazon makes up a pretty large portion of both the Nasdaq and the S&P. So Amazon being down over 4% is one of the reasons why the Nasdaq and S&P were down. But ultimately, it ended up being a very small reason compared to all of the other reasons why the stock market was down on Tuesday.
Other retail companies struggled as well, with Target saying it will close nine stores in major cities, citing violence and theft. And it wasn’t just Target struggling. Costco topped their quarterly earnings estimates, but their sales came in soft. Comparable sales for the company rose 1.1% year over year, but only 0.2% in the US. As a result of the weak guidance and expectations, Costco was down about 1.6% after reporting earnings. And this just goes to show how consumer demand is slowing down and consumer spending is slowing down as inflation continues to rise and interest rates continue to go up as well.
Now there are other things happening in the economy right now as well that also pushed the stock market down on Tuesday. And one of those is the United Auto Workers strike that’s occurring right now. The United Auto Workers, UAW, are asking for a higher pay raise while the actual companies (GM, Ford and Stellantis) are trying to create much smaller pay raises. Ford, in particular, has already said that if they were to give in to the United Auto Workers demands for their pay raises, that it would bankrupt Ford. And unfortunately, President Biden has now gone to Michigan and has stood with the striking UAW autoworkers supporting big pay raises.
Well, Mr. President, I’m not sure if you understand how the economy works. If they do, in fact, go through with these large pay raises (outside of the fact that Ford would actually be bankrupt) the pay raises are ultimately going to get passed on to consumers through higher car prices. And that in turn means higher inflation. So all you’re really doing by supporting larger pay raises is causing inflation to go up. And that ultimately is going to hurt the US consumer even more.
Now in addition to the UAW strikes, President Biden has also called on Congress to fund the government, as Moody’s and Wells Fargo warn of shutdown effects. You see, every year at the end of September, the stock market and crypto tend to sell off over fears of a government shutdown. The reason for that is because the federal budget runs from October 1st through September 30th each year, and Congress has to agree upon a new budget by the end of the deadline, which is September 30th. If they fail to do so, the US government will shut down until a new budget is put into place. And this is really bad news for the economy and this is why stocks and crypto go down.
Funding appropriation for federal government operations is set to expire Saturday, leaving just days for Congress to pass all 12 appropriations bills and Biden to sign them. The Republican led House has only managed to pass one such bill. Failure to pass the remaining 11 bills would cause federal workers to be furloughed, agencies to shutter, and place many essential programs in peril. And this has led Moody’s and Wells Fargo to warn this week that a shutdown would negatively affect the US economy. Moody’s, the only major credit rating agency left to still give US sovereign credit a top AAA rating on Monday said a shutdown would affect that rating. “A shutdown would be credit negative for the US sovereign”, Moody’s analysts wrote in a note.
And more credit downgrades would have a significantly negative effect on stocks. Every single time we get a credit downgrade, we see a major sell off in stocks, at least temporarily. And with the government shutdown looming on Saturday and with Moody’s now warning of a credit downgrade should the government shut down, this has caused a major sell off in stocks, especially in the financial sector. And this is causing stocks across the board to sell off. And as historically happens, stocks will most likely to continue to sell off through the end of Friday.
Now whether stocks continue to sell off after Friday depends upon whether or not Congress can come up with an agreement over the weekend before the government actually shuts down. If come Monday, we do in fact get a government shutdown, we can expect stocks to have a major sell off. And if come Monday, the government shutdown is averted, we can expect a major rally in stocks. So through the end of this week remains extremely bearish, but going into Monday is a coin flip. We have no idea which way the market’s going to go, but we can expect a major move in stocks on Monday. We just don’t know what direction.
And unfortunately, the White House has warned that a lengthy government shutdown may substantially disrupt the restart of student loan bills. That’s right. Just as consumer spending is slowing down, and personal savings rates are getting depleted, and credit cards are getting maxed out – now student loan repayments are due starting in October, which is going to put even more pressure on consumers, and cause an even greater slowdown in the overall economy.
So how is the economy doing right now? Well, sales of newly built homes reversed course, dropping nearly 9% in August as interest rates continue to rise. This is making homes more and more unaffordable, which in turn is causing home sales to go down. This is going to eventually cause home prices to go down in order to meet the now lower demand. As home prices go down, this is going to cause some people to start becoming underwater on their mortgages, meaning they’re going to owe more than their house is actually worth. And should anything bad happen to them, such as a layoff, they’re just going to stop paying on their mortgage. They’re going to go into default. And this is going to lead to another wave of defaults, just like we saw during the great financial crisis. So unfortunately, the housing sector is in the very early stages of forming another great financial crisis.
And higher interest rates, unaffordable housing, and increased gas prices have caused consumer confidence to stumble to a four month low. As US recession worries grow, consumer confidence is falling. And despite what the Federal Reserve and President Biden say, consumers are feeling it in their pocketbooks. Consumers know that a recession is coming – if we’re not already in one.
And unfortunately the Federal Reserve is likely to make things even worse, with Fed’s Neel Kashkari now seeing a 40% chance of meaningfully higher interest rates. As the economy slows down, and consumer spending slows down, and company profits get hurt sending stock prices down, the Federal Reserve wants to continue to raise interest rates, making things even worse. The reason is because inflation continues to go up. And really the only tool the Federal Reserve has in order to get inflation down is to raise interest rates. As the Federal Reserve continues to raise interest rates in order to fight inflation, this in turn makes the economy even worse, which send us into eventually a deep recession. As they say, all recessions are man made, and you are witnessing the Federal Reserve make a recession as we speak.
Of course, it’s not just stocks that are falling. Crypto has been falling as well. JP Morgan Chase UK Bank is blocking crypto transactions over scam fears, and Binance, the world’s biggest crypto firm, is melting down with dozens of top level executives leaving the company and the company on the verge of bankruptcy. If you thought the FTX collapse was a big deal, just wait until Binance collapses. Binance is the largest crypto exchange in the world, and if they collapse, it could really bring crypto prices down. So this is a major problem for cryptocurrencies right now. Binance is going to have to survive this if crypto is expected to survive and go up.
Now, despite the sell off that we’re getting right now, it’s not the end of the world. Stocks will eventually bottom out, and Wall Street analysts expect the S&P 500 to rise 19% over the next 12 months. Keep in mind that while September is historically the worst month of the year for the stock market, it does normally bottom out in October, and October is where the stock market normally finds a bottom and then starts to rally. So if history does in fact repeat itself, the stock market should start to rally next month in October. And analysts expect the market to go up 19% over the next 12 months, meaning it’s getting very close to time to buy the dip for long term investors.
And right now is a great time to make money with put options. That’s certainly what I’m doing. I bought a SPY put option yesterday that we’re up about 80% on. I continue to hold it. I think the S&P is going to continue to fall for the next couple of days. I will let you know when I sell that and how much I make. By the way, if you want to know everything that I’m buying and selling, and how I’m making all these trades, come join me in my coaching program where you’ll get all of my trade alerts. If you want to get my trades and start making these 70% to 80% profits like I’m making, then check out the coaching program here.
And of course, by the end of the week I’m going to sell all of these put options and then come Monday, I’m going to start looking at opportunities to buy some call options to ride the market back up over the next 12 months or so. So that’s my game plan for now. Of course, it could change. If you want to know what I’m doing, make sure you join us in the coaching program.