What is making the current stock market go up and down like a yo-yo?

Would appreciate hearing/reading the general feelings/wisdom as to what is causing the saw tooth actions of all the stock markets. The "insight" provided by the pundits


(I gues the emphasis should be on the first three letters) usually states something like (Earnings Concerns Rattle Wall Street) and when you look at which company didn't do well it's MickyD while on the other hand AT%26amp;T, Dupont, Jet Blue, etc reported significant rises in the amount of income/profit they made. Personally I think it is the Hedge fund managers playing games but would really appreciate your thoughts. Thanks..|||The US stock market IS MUCH more wild now than in mid February. The VIX index was at 18 today and was at 10 in mid Feb. That's an 80% increase.





I'd say that there are 4 factors driving this volatility.





1) Lower grade credit and debt are now uncertain. It started with bad sub-prime mortgages, but now investors are fleeing any debt with less than AA ratings. Lots of folks bought lower grade bonds etc. a couple years ago, because that was the only way to get a yield over 5%.





2) The value of the dollar is declining every day against most foreign currencies. You can get over 5% in a money market account, but the value of that dollar is dropping much faster than the interest is accruing. The dollar index is at 80.15. If it drops below 80, that will be the lowest point in 30 years. Some have called the resulting investor action the "flight from cash."





3) There is a lot of money that can flow into stocks on a good day, but a lot of fear (see 1 %26amp; 2) on bad days. There is much less stock available on the market to buy, compared to 2 years ago. Buyouts %26amp; M%26amp;A have reduced available shares as have massive stock buybacks. More hot money %26amp; less stock tends to drive volatility up.





4) I think the hedge funds do seek out and cause higher volatility. If a hedge fund can't beat the performance of a good index fund, then it has no reason to exist. Zero volatility = hedge fund death.





It is tough to manufacture volatility out of thin air, but there are things that help. Investors expect a lower/crazier market in the summer. Fear is higher now. There is lots of good and bad news flying around: sub-prime, slower economy, earnings season, etc. No news often means low volatility, but we have too much news right now.|||2ND quarter earnings. so me real good news and some bad news. countrywide earnings off by 33% because of bad mortgages. but as i see we already know this. i am going to jump back in when the stocks making 52 week lows out number the number of stocks making 52 week highs. i waighht untill this happens on all 3 exchanges.





HAPPY INVESTING|||increased volatility, increased uncertainty, difficult to quantify market risk with so many factors, each pointing in a different direction|||The stock market usually goes up and down like a yo-yo. I don't find the current market significantly different from how it has always been.|||Space Cadet,





The market is controlled (at least in theory) by investors. If they decide to invest, the market goes up. If they take money out, it goes down.





People invest when they think their investment will grow. Just about anything can cause people to invest or take money out (political change, news, economic conditions, money supply, etc...)|||Market hedging, Big issue, In-order to rise exports, US is keen in depreciating Dollar, So the companies that have out sourced are paying more in against services they are receiving, Dupont is big players here, This company is on Value delivery Network and almost all business is outsourced to China, India, Pakistan and Egypt. To control inflation Govt, has increased money supply with 3%, that made people investing more in Equity market and oldies in business are doing short sell to Curb this high rise|||It is complicated. Certainly, hedge funds selling naked shorts do affect the market. However, the other influences include:


Declining Dollar against other world currencies


High Cost of Commodities


Sub-prime debacle, now entering the prime market


Continuation of government to print money which is not backed by assets.


We were in a hyper-liquid environment and now easy credit is drying up


As home prices decline and interest rates increase, there is less equity and more bills to pay.


U.S. Citizens don't save enough- so they can't weather the swings in prices


There are jitters because companies ( especially private equity companies) are leveraging ( borrowing) massive amounts of $ to take companies private and companies are buying back their own share with borrowed dollars to try to improve their bottom lines.


Also, bonds have lost about 6% in the past few weeks. With it all, the Dow is still near its all time highs.





To really get a good feel for how the economy works, you have to look global, not just at McDonalds or Jet Blue.