What LIers need to know about Friday's stock market turmoil
A trader on the floor of the New York Stock Exchange on Friday. Although stocks closed lower after the July jobs report, Stony Brook University professor and economist John A. Rizzo said, "The economy is still strong overall." Credit: Getty Images/Michael M. Santiago
Stocks fell sharply Friday following a weaker-than-expected jobs report. The S&P 500 dropped 2.1% this week, which was its largest weekly drop since April.
The Nasdaq composite index, which is dominated by tech stocks, fell 2.4% on Friday and is now down more than 10% since its all-time high in July.
But the major stock indexes are still up year to-date. The S&P 500 has gained 12.1% to-date, and the Nasdaq has gained 11.8%.
Here's what Long Islanders should know about this week's stock market turbulence:
What caused the stock market ups and downs?
The U.S. Labor Department reported nonfarm jobs increased by 114,000 in July. That was below economists’ consensus forecast of 175,000 jobs, according to FactSet.
That report followed the Federal Reserve's announcement on Wednesday that it would keep its benchmark interest rate unchanged at a 23-year high.
The jobs report caused investors to question whether the Fed was wrong to hold off on lowering interest rates earlier this week and whether the chance of a recession has increased, said David Frisch, CEO of Melville-based investment management and financial planning firm Frisch Financial Group.
"Because of the higher possibility, and by no means probability [of recession], the market got hit," Frisch said.
What should Long Islanders invested in stocks do?
Investment advisers caution against panic-selling stocks and trying to "time the market," which poses the risk of buying and selling stocks at the wrong time.
Frisch recommended investors use the stock pullback to evaluate their portfolio and decide whether they have the right mix of investments for their goals. Those who need money sooner for a home purchase might consider safer investments, while those saving for a far-off retirement may want to be more aggressive.
"This is really the time with the market still being up — it may be down a bit but it's still high — to reevaluate whether the amount of risk that you're taking is appropriate," he said.
What does this mean for the U.S. economy?
Last week, the federal Bureau of Economic Analysis reported that the gross domestic product, the sum of all goods and services produced in the country, rose 2.8% in the April-June period or double the rate in January-March. That growth rate surpassed economists' projection of 1.9%.
"What happened today [on Wall Street] is much ado about nothing," said John A. Rizzo, an economist and Stony Brook University professor. "The economy is still strong overall."
He said "nervous investors just contribute volatility to the market, and they are not, in my opinion, true investors. They are more like nervous kittens, and they have little sense of conviction."
How did Long Islanders react?
Outside the Walmart in South Farmingdale, Raoul Perez, 38, an office worker in Melville, was taking the stock market gyrations in stride on Friday.
"I’m not buying and I’m not selling," the Brentwood resident said. "I take the long view. I’m in the stock market for the long haul."
Maryann Schwartz, 67, a retiree from Farmingdale, said, "I’m nervous about what I see going on. I don’t have time to wait for the stock market to rebound. I’m going to have to consider what I should do. I plan to speak with my financial adviser on Monday."
What's next?
Investors will be closely monitoring the next inflation report, which will be released Aug. 14, the next jobs report on Sept. 6 as well as other data on consumer spending. The Fed's next policy decision on interest rates will come at its Sept. 18 meeting.
Stocks fell sharply Friday following a weaker-than-expected jobs report. The S&P 500 dropped 2.1% this week, which was its largest weekly drop since April.
The Nasdaq composite index, which is dominated by tech stocks, fell 2.4% on Friday and is now down more than 10% since its all-time high in July.
But the major stock indexes are still up year to-date. The S&P 500 has gained 12.1% to-date, and the Nasdaq has gained 11.8%.
Here's what Long Islanders should know about this week's stock market turbulence:
What caused the stock market ups and downs?
The U.S. Labor Department reported nonfarm jobs increased by 114,000 in July. That was below economists’ consensus forecast of 175,000 jobs, according to FactSet.
That report followed the Federal Reserve's announcement on Wednesday that it would keep its benchmark interest rate unchanged at a 23-year high.
The jobs report caused investors to question whether the Fed was wrong to hold off on lowering interest rates earlier this week and whether the chance of a recession has increased, said David Frisch, CEO of Melville-based investment management and financial planning firm Frisch Financial Group.
"Because of the higher possibility, and by no means probability [of recession], the market got hit," Frisch said.
What should Long Islanders invested in stocks do?
Investment advisers caution against panic-selling stocks and trying to "time the market," which poses the risk of buying and selling stocks at the wrong time.
Frisch recommended investors use the stock pullback to evaluate their portfolio and decide whether they have the right mix of investments for their goals. Those who need money sooner for a home purchase might consider safer investments, while those saving for a far-off retirement may want to be more aggressive.
"This is really the time with the market still being up — it may be down a bit but it's still high — to reevaluate whether the amount of risk that you're taking is appropriate," he said.
What does this mean for the U.S. economy?
Last week, the federal Bureau of Economic Analysis reported that the gross domestic product, the sum of all goods and services produced in the country, rose 2.8% in the April-June period or double the rate in January-March. That growth rate surpassed economists' projection of 1.9%.
"What happened today [on Wall Street] is much ado about nothing," said John A. Rizzo, an economist and Stony Brook University professor. "The economy is still strong overall."
He said "nervous investors just contribute volatility to the market, and they are not, in my opinion, true investors. They are more like nervous kittens, and they have little sense of conviction."
How did Long Islanders react?
Outside the Walmart in South Farmingdale, Raoul Perez, 38, an office worker in Melville, was taking the stock market gyrations in stride on Friday.
"I’m not buying and I’m not selling," the Brentwood resident said. "I take the long view. I’m in the stock market for the long haul."
Maryann Schwartz, 67, a retiree from Farmingdale, said, "I’m nervous about what I see going on. I don’t have time to wait for the stock market to rebound. I’m going to have to consider what I should do. I plan to speak with my financial adviser on Monday."
What's next?
Investors will be closely monitoring the next inflation report, which will be released Aug. 14, the next jobs report on Sept. 6 as well as other data on consumer spending. The Fed's next policy decision on interest rates will come at its Sept. 18 meeting.
'Need to step up regulations and testing' "Car fluff" is being deposited at Brookhaven landfill at a fast clip, but with little discussion. NewsdayTV's Virginia Huie and Newsday investigative reporter Paul LaRocco have the story.
'Need to step up regulations and testing' "Car fluff" is being deposited at Brookhaven landfill at a fast clip, but with little discussion. NewsdayTV's Virginia Huie and Newsday investigative reporter Paul LaRocco have the story.
