Stock Market Capitulation on the Ilyce Glink Show September 25, 2011:

Barron’s columnist Alan Abelson, a professional I really respect, wrote a piece yesterday entitled September Massacre. In it, Abelson discusses this week’s gruesome losses on Wall Street and how the markets are undergoing a sort of capitulation, something we last experienced in March of 2009.

According to web resource Investopedia, stock market capitulation occurs “when investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into less risky investments. True capitulation involves extremely high volume and sharp declines. It usually is indicated by panic selling.”

If this sounds reminiscent of market losses just a couple years back at the pinnacle of the Great Recession, well it should. Just how rough was Wall Street’s week?

  • On Thursday, the Dow dipped 570-odd points before ending the week at 10,771.
  • Blue chips alone lost 6.4 percent for the week.
  • The S&P was also down 6.4 percent.
  • The NASDAQ dropped 5.3 percent.
  • Oil was down $8.11 a barrel, the steepest retreat since May of this year.
  • And recent investment darling gold dropped 10 percent, the biggest decline in 28 years.

So where is everyone going with their money? Treasury bonds, which at the moment are yielding an anemic 1.33 percent.

Amongst so much negative financial news, the one boon many point to is the continued drop in mortgage interest rates, which fell again this week. But I would caution the enthusiastic. These declines are certainly tied to the battered economy. When you’re talking about 60-year lows, World War II-level lows, it doesn’t mean anything good.

Callers, guests and I discuss these issues, the job market, managing your credit and all other personal finance topics.

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