When the closing bell rang on Wall St. yesterday, a 128 point loss didn’t look so bad. With foreign markets in free fall the past few days, and the Dow dropping more than 450 points at the open, many market watchers were bracing for black Tuesday.
But even with the Dow paring much of its losses by late morning, Nick Raich with National City’s Private Client Group, says the phones there were ringing with nervous clients.
RAICH: We’re trying our best to reassure clients that to stay calm, don’t panic, these moves happen.
But if the Federal Reserve hadn’t cut rates dramatically before the open yesterday, Tuesday may have been remembered for a much bigger decline. Baldwin Wallace Economics professor Veronica Kalich says the fed action could be taken as an acknowledgment that things are not likely to look up soon.
KALICH: It’s almost as if the fed validated the fear that there is a recession by saying well, we’ll try to ease up.
Here in northeast Ohio, the big story was the health of the region’s banks. National City and KeyCorp both posted dramatic drops in fourth-quarter earnings. Key’s profits plummeted 83 percent versus a year ago. National City posted a $333 million loss.
The banks’ stock prices soared, though. Key was up over 12% for the day. That’s partly because lower interest rates benefit banks. And Kevin Smith with A. G. Edwards & Sons in Beachwood says there’s growing confidence among investors in the regional banks.
SMITH: Most times when the stock market has a big dip. There’s a bounce that day or a next day, so people are trying to make a trade to capitalize on that bounce. I don’t recommend that. That’s not what long-term investing is about.
Smith thinks yesterday’s stock market activity is just a blip on the radar screen. He says most won’t even remember this day, but he warns it will take Northeast Ohio longer than other parts of the country to rebound.
SMITH: Cleveland historically, we go into economic tougher economic times sooner and it takes us longer to come out. We don’t seem to have as much velocity in the economy than other places do.
But because the American dollar has declined in recent months, Northeast Ohio’s manufacturing sector has benefited from more foreign investors buying our products.
Mark Dodosh of Crain's Cleveland Business says that could change if markets continue to tumble overseas.
DODOSH: It's made U.S. goods more affordable, particularly goods from NEO, so if the markets overseas were to fall in like manner as far as having a belief that things are not going to be as good, consequently companies will not be as willing to commit dollars to investment, then it could have a negative impact on the markets here.
Dodosh says it’s such a volatile time for the world markets that we should be careful predicting results for the next few months.
Some investors in Cleveland are clearly spooked by the market madness. Federal attorney George Roscoe says he’s focusing on some… alternative investments.
ROSCOE: With the investments in antiques, I have my investments around me. If I want to sell them, I can sell them. There’s always a market for them. And, with the market as it is now, I don’t think I’m going to get back into the market again.
With more volatility expected this week, we’ll see if other investors follow his lead.