Friday's sell-off, prompted by the latest inflation figures and fears of interest rate hikes, may have forced traders to begin a more stringent selection process. It's increasingly difficult to predict an upward drift in whole sectors, and the strategy of hedging Dow investments against NASDAQ buys came unstuck Friday when they dived in concert. Still, it's a safe bet that somethinghas to go up, since Friday's sell-off has sent hundreds of billions of dollars roaming in search of new homes. Whether it be bonds or utilities or safer tech stocks or safer blue chips, the operative word in the coming weeks will be selectivityas analysts look for equities with stamina. And that may turn out to be just the Darwinian shakeout a bubble market needed.
It was always going to be a "black Monday" on Asian and European markets, but Wall Street saw the beginnings of a skittish recovery. After a day of see-saw trading, NASDAQ had clawed its way back a healthy 6 percent gain following its Friday plunge, while the Dow had soared by 217 points. Earlier, traders spooked by New York's frightful Friday fled Asian markets in droves, shaving 7 percent off Tokyo's Nikkei index and 8.6 percent off Hong Kong's Hang Seng. London's FTSE fell 4 percent to a six-month low in the first minutes of trading before leveling out, along with similarly hit European markets, into a holding pattern ahead of New York's opening. Despite Monday's good news, the market remains nervous. "The choppiness in the market is by no means over," says TIME business editor Bill Saporito. "The key question remains where is the bottom, and what is it's shape. Many people believe it's unlikely to be V-shaped, and that NASDAQ still has some way to fall some stocks that have fallen as much as 50 percent may still be overvalued."