- Posted August 25, 2015
- Tweet This | Share on Facebook
Q&A: What a stock market 'correction' means to you
NEW YORK (AP) - The stock market's steep decline last week has pushed the Dow Jones industrial average into what is known as "correction" territory.
Here are some common questions asked about corrections and what they mean to average investors:
What is a stock market correction?
A "correction" is a Wall Street term for when an index like the Dow industrials or the Nasdaq - or an individual stock - falls 10 percent from its most-recent high. The Dow lost 530.94 points last Friday and closed at 16,459, which is 10.1 percent below its record close of 18,312 set on May 19. A correction is not the same as a bear market, which is defined as when a stock index or individual stock falls 20 percent from its most-recent peak.
Is the entire stock market in a correction?
No. In fact, the Standard & Poor's 500 index, considered a far broader gauge of the U.S. stock market's health, is down 7.5 percent from its most-recent high. The Nasdaq is precariously close to being in a correction, down 9.8 percent from its most-recent high, but that is not by definition a correction.
When was the last time we had a correction?
The U.S. stock market entered into its last correction in October 2011, but the market's downturn started in late July 2011. That correction was caused by a combination of factors, one being the U.S. government near breach of its debt ceiling and subsequent credit downgrade from Standard & Poor's, as well as fears about Greece's financial condition.
Are corrections a normal thing for the market?
Stock market corrections have historically happened every 18 months. The fact that the U.S. market went nearly four years without one is historically unusual - it is the third-longest such streak in the last 50 years, according to JPMorgan Asset Management. Even the most bullish of market strategists will say a correction is ultimately healthy for a market because it removes some of the froth and speculation.
Published: Tue, Aug 25, 2015
headlines Oakland County
- Whitmer signs gun violence prevention legislation
- Department of Attorney General conducts statewide warrant sweep, arrests 9
- Adoptive families across Michigan recognized during Adoption Day and Month
- Reproductive Health Act signed into law
- Case study: Documentary highlights history of courts in the Eastern District
headlines National
- Lucy Lang, NY inspector general, has always wanted rules evenly applied
- ACLU and BigLaw firm use ‘Orange is the New Black’ in hashtag effort to promote NY jail reform
- 2024 Year in Review: Integrated legal AI and more effective case management
- How to ensure your legal team is well-prepared for the shifting privacy landscape
- Judge denies bid by former Duane Morris partner to stop his wife’s funeral
- Attorney discipline records short of disbarment would be expunged after 8 years under state bar plan