How to localize the stock market freefall
This graphic from The Wall Street Journal shows the nearly 1,000-point drop in the Dow Jones Industrial Average on May 6, 2010.
Don’t file away those ‘gold party’ story ideas just yet. Investors fled to the safe haven of the precious metal in droves on Thursday, driving prices to nearly $1,200 an ounce amid a stock market freefall that trading-floor veterans described as “eerie” and “somber.” Theories about what precipitated Thursday’s near-1,000-point drop on the Dow range from a trader’s typo to fears about European economic woes to an overdue correction in an excessively optimistic market. This WSJ article rounds up the possible reasons behind the emergence of the bears in recent days
This NYT Economics blog outlines some of the reasons for the fiscal contagion spreading across Europe, including Spain and Portugal. And this CNBC piece includes a grim forecast for all of Europe, and for the region’s currency, which is hovering around a 14-month low against the dollar.
And while a strong dollar may sound good intuitively, it’s bad news for U.S. communities that rely on tourism and for U.S. companies trying to sell goods and services overseas. This piece by AP columnist Rachel Beck explains more on the dangers of a strong U.S. currency.
Bottom line is that investors are worried American companies’ fragile recovery will be derailed by woes across the ocean. Airline stocks, for example, have plunged on fears that collapsing foreign economies will reduce demand, as this MarketWatch story illustrates. Oil prices, ditto.
So just as your readers were getting the nerve to open their 401(k) statements again, uncertainty strikes. Here are a couple of ways you might want to localize the overseas turmoil and the domestic market gyrations:
Corporate ties. Now is the time to revisit major local players and determine the extent of their overseas exposure. What could reduced demand from ailing European economies do to their revenue, and how would that ripple out to affect employees and shareholders in your neck of the woods?
If companies aren’t doing business directly, they still might rely on suppliers in struggling nations. Or, they might be worried about where corporate cash is invested. Remember that even if local companies themselves don’t have any newsworthy ties to the troubles, their leaders may be closely following the action and have insight that will round out your stories.
Check out Tradestats. This government Web site offers stats on which countries are your state’s biggest trading partners. Looking at the data, remember that exports were expected to help lead the United States out of recession.
Local stocks. Those of you near Cincinnati (where Procter & Gamble shares lost more than a third of their value on Thursday) don’t need this reminder. But when selloffs occur, it’s always a good idea to check out the effect on local stocks and get reaction from company leaders. This angle also cries out for an infographic and a reader poll or comments area.
Individual investors.In the same vein, talk with local investors about their portfolio concerns. Aside from tried and true methods of reaching shareholders and retirees, consider broadening your reach by using social media. Seek out special-interest groups on Facebook, for example, or find ex-employees and retirees of hard-hit companies through LinkedIn. Use the advanced search in Twitter to search related keywords in your area.
If you need advisers to add perspective (keeping in mind that it generally will take an upbeat spin) do a ZIP-code search at the Certified Financial Planner’s site for credentialed professionals in your area.
Tourism. As we head into warmer months, U.S. destinations popular with European tourists may be suffering from those travelers’ reduced purchasing power. Check with attractions, hotels, home-rental agencies, charter organizers and other facets of the vacation industry for an update.
And here are more ideas on covering the market’s fall from Al Tompkins at Poynter.org.
