Today was a day to forget for many highly owned stocks that have recently had brilliant runs. The overall market was weak, but inside that market there was huge weakness in those stocks which have been market leaders. The Dow finished lower by 55 points. The S&P 500 finished lower by 14.52, or exactly 1.00%. The Nasdaq dropped by 44 points, or 1.67%.
The basic material stocks were absolutely torched today as gold prices fell and investors sold everything that has done well recently. Freeport McMoran (NYSE:FCX) dropped by 9.45% and has now lost over 20% in the last couple weeks. Potash Corporation (NYSE:POT) plunged 13.64% on no apparent company specific news. The Mosaic Company (NYSE:MOS) also plunged by 13.67% on more than double its average daily volume. Barrick Gold Corporation (NYSE:ABX) and Goldcorp (NYSE:GG) both were hit hard by plunging gold prices, losing 7.79% and 6.93%.
Energy stocks were another group that were absolutely taken to the woodshed today. Oil prices fell by $2.50 a barrel today and oil related stocks were hit hard across the board. Chinese oil stocks, which were so hot just a couple weeks ago were sold off in a big way today. PetroChina Company Limited (NYSE:PTR) lost 8.59% and CNOOC Limited (NYSE:CEO) fell 8.41% on the day. National-Oilwell Varco (NYSE:NOV) plunged by 9.93% on strong volume today. Apache Corporation (NYSE:APA) fell by 6.17% on the day.
The construction and infrastructure stocks are another group that has been extremely strong in the past year or so, and today they were sold off across the board. Fluor Corporation (NYSE:FLR) lost 8.32% today. McDermott International (NYSE:MDR) fell 10.71% on strong volume and has now lost over 20% in two weeks. Foster Wheeler Limited (Nasdaq:FWLT) and Jacobs Engineering Group (NYSE:JEC) also were hit hard, losing 7.9% and 7.37% respectively.
As if these three areas weren't enough, the previously high flying tech sector was hit hard today as well. VMware (NYSE:VMW) shares fell by 8.41% today and have lost over 35% from their 52 week high set on Halloween! Research in Motion Limited (Nasdaq:RIMM) plunged another 9.38% today on double its normal volume. Baidu.com (Nasdaq:BIDU) shed another 12.18% today and has lost a staggering 120 points in the past week!
I figured it was likely to happen in this correction, and it certainly has, the hottest of the momentum stocks have broken and they are now leading the charge lower. The decline in some of the basic material stocks was breathtaking today. It is as if all of those bull market groups suddenly became dogs. We all know that many of these companies will continue to do well, but what will the stocks do? If history is any guide these momentum stocks will likely head lower still before turning around. In the midst of a steep selloff such as the one we are currently undergoing, the market always overshoots to the downside.
I urge readers not to panic, investors who panic will likely ending up selling quality stocks at very low prices. Having more cash than normal on hand is certainly a strategy I have been advocating for quite some time now, but selling out of the market altogether would be a poor move. Sooner rather than later I believe, there will be lots of quality companies with stocks that are underpriced and ripe for the picking.
Hold tight, because the volatility is likely to continue this week.
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It's a good time to be cautious and like you mentioned, "Don't Panic." With a slow economy and a lot of uncertainty, it's not a bad idea to have a conservative portfolio. At least until the economy starts to shine again!
Posted by: Model Stock Portfolio | November 12, 2007 10:36 PM | Permalink to Comment