Financial markets in the U.S. and around the world have seen profound ups and downs over the past day as officials grapple with how to manage debt issues. Currently, the U.S. Federal Reserve is working on a monetary statement that is set to be announced this afternoon, investors overcome losses overnight and lawmakers deal with the reality that any chance of a housing recovery may have all but disappeared.
Investors Lose $1 Trillion in Stock Market Investments
Monday marked another tough day for the stock market. In the morning, the market opened with a dramatic drop after news that Standard & Poor’s had lowered the nation’s credit rating from AAA to AA+. Unfortunately, the trend continued throughout the day, resulting in a massive loss by the market’s close.
The Wilshire 5000 Total Market Index, which is the broadest index of U.S. stocks, fell 891.93 points–a monetary loss of $1 trillion. This loss represented a 7 percent drop, which is the largest for the index since Dec. 1, 2008 when it fell 9 percent.
Stocks on Tuesday managed to open higher than expected but are likely to fluctuate in the coming days.
Hopes of a Housing Recovery Slip Away
Another casualty of the world economic struggles is the housing market. According to the latest analysis of home price trends by Fiserv/Case-Shiller Indexes, the 384 markets analyzed won’t see median home prices on par with those from the first quarter of this year until well into the first quarter of 2013.
This isn’t saying much since prices fell during the first quarter of 2011 in 302 of the markets tracked. This represented an average 5.1 percent year-over-year drop.
The debt crisis and threat of default was largely blamed for the issues in the housing market. Also, low job prospects are said to play a major role.
The Fed to Release Monetary Statement, Possible Qe3
Later today, the Federal Reserve is expected to release a monetary statement that will address U.S. economic issues after nearly defaulting on its debt last week. Some options it is considering include additional asset purchases, strengthening the commitment to low interest rates or the possibility of another round of quantitative easing, or Qe3.
Quantitative easing means that the government creates money by writing a check in exchange for financial assets in the market–usually corporate and government bonds–to boost the economy. However, many have looked down on this approach since the first two attempts were said not to have worked.
With investors around the world making snap decisions based on market uncertainty and riots in London–currently in their third day–blamed largely on global economic struggles, investors are anxiously awaiting some good news. The Fed is expected to release its statement at 2:15 p.m., EDT.
