The market's orderly panic

As a blithely written post on the interest rate yield curve was being written, the equity market began falling apart. We're back where we were two weeks ago(see 2/27 post). Uncertainty is in control, if that makes any sense, and damage is being assessed.

Today's significant downturn had two interesting aspects. First, on average, it was remarkably uniform. Look at this. Fidelity's big low cost index funds were down as follows: S&P 500 - 2.00%; Total Market - 2.02%; Extended Market - 2.05%; and International - 2.05%. On top of that, while not an index, the Fidelity Emerging Markets Fund was down 2.27%. This kind of uniform capitulation does not bode well for the next few days but once done, it should actually be over and set up a climb out of the abyss. Second, and somewhat more worrisome, is the fact that financials were leading the way down. On the surface this is clearly due to the continued implosion of the sub-prime mortgage market, and today's payment news which indicates that issues are developing that are not just in sub-prime. Understandable. But markets have a sixth sense for trouble and the real worry would be if there was a break of some sort in the credit derivatives markets.

It's time to watch an old movie.