I had been saying that we were due for a correction before long. We have gone up in a nearly unbroken advance dating back to mid-December. Three months is a long time and the Nasdaq gained nearly 20%.
When an overbought condition meets bad news you have what we had today which is the third down day in a row.
The news was that China reported that manufacturing is slowing down for the 4th month in a row. People have been wondering whether China’s engineered slowdown would be a soft or hard landing and this really makes them wonder about the hard landing case. China’s intent was to slow down the rate of growth, not contract.
Of course, this comes on top of the recession in Europe. Apparently even mighty Germany is slowing down and so is France. Japan remains in a funk. When the countries to which you export to or do business in start shrinking, guess what? – so will your sales and profits and that hurts stock prices.
Gold was also down 0.4%, oil was down 1.3% while the dollar and high quality bonds were up slightly. I expect this drop to continue for a little bit.