The Panic Is Here

After being down over 800 points this afternoon, the Dow staged a furious rally in the last hour to close down only 370 points. Nasdaq lost 84 points, while the S&P 500 dropped 42 points.

By mid-afternoon, with the Dow showing it’s largest, single day drop, it was clear that panic has set in. Investors have been marked with depression in recent weeks as company failures, depressing employment numbers and abysmal economic forecasts dominated the headlines. However, the markets always seemed to hold onto a shred of hope that the government would provide a bailout package that would rescue us all from this disaster. Now that Congress has passed a $700 billion bailout package, investors are now truly panicking as they realize that the worse is yet to come.

Small cap stocks were absolutely pummeled today, as the small cap internet sector lost 13.4%. Leading the sell-off was Miva (MIVA) which saw it’s price drop over 41%. Autobytel (ABTL) fell 26%, while Local.com (LOCM) dropped 20%.

Oil fell $4.70 to $89.18 per barrel. However, that failed to buoy airline stocks like similar drops have done recently. United Airlines fell over 17% today after releasing disappointing traffic and capacity numbers on Friday. Continental (CAL) and American (AMR) also posted double-digit drops, falling 11% and 10% respectively.

Discount stores were one of the few sectors that managed to make gains today. Family Dollar Stores (FDO), after announced better than expected quarterly results on Friday, was up another 3.9% today. That also lifted Dollar Tree (DLTR) to a 2.7% gain.

Panicking investors did send gold prices by $30 to $863.20 an ounce. However, the commodities sector finished mixed as silver dropped to $11 and high grade copper fell over 9% to $2.46.

The markets have seen several big sell-off days like this in recent weeks. To date, they have all been follow-up by big rallies on the following day. However, if the markets fail to recover and in fact post another big drop tomorrow…..the panic will be justified.