Stock Market To Reopen Wednesday; Disney Buys Lucasfilm

By ALAN R. ELLIOTT, INVESTOR’S BUSINESS DAILY

Financial markets were set to resume normal trading Wednesday, after a two-day hiatus forced by Superstorm Sandy.

The Nasdaq OMX Group and NYSE Euronext announced U.S. stock, options and other related markets would have normal schedules and procedures Wednesday morning.

CME Group said futures markets would also resume a normal trading schedule. Stock and options markets have been closed, and futures markets were closed during the day, trading electronically between 5 p.m. and 8:15 a.m. CT Monday and Tuesday due to Sandy. The bond market, closed since early on Monday, will open with a normal schedule.

Sandy’s storm surge continued to cause flooding, primarily in New York and New Jersey, and to pour rain over a large portion of the eastern seaboard.

The Case Shiller 20-City index, released Tuesday morning, showed home prices rose 2% in August, with 19 of 20 cities surveyed showing monthly increases. Analysts had forecast a 1.5% improvement. Prices surged 18.8% in Phoenix, its fourth consecutive double-digit increase and the best performance of the 20 cities.

Earnings reports continued to roll out Tuesday, largely unaffected by the storm. Ford, (F) BP (BP) and Allergan (AGN) were among the companies to top expectations.

Disney (DIS) reported it would pay $4.1 billion to acquire San Francisco-based Lucasfilm. The production company that created the Star Wars film series is owned entirely by founder George Lucas.

Investors are bracing for a hectic trading session when markets reopen Wednesday. Two days of sidelined trading, responses to earnings reports and reactions to the effects of storm damage will all come into play.

Stock Market Closed Tuesday Due To Hurricane Sandy

By VICTOR REKLAITIS, INVESTOR’S BUSINESS DAILY

The stock market will stay dark Tuesday because of Hurricane Sandy, in the first weather-related, consecutive-day closure for stock trading since 1888.

“We intend to re-open our U.S. markets on Wednesday, Oct. 31, 2012, conditions permitting,” the NYSE said in a news release. “Updates will be provided tomorrow.”

Bond trading ended at noon ET Monday and will be closed Tuesday.

Many companies have been rescheduling their quarterly earnings reports. Cirrus Logic (CRUS), No. 12 in Monday’s IBD 50 lineup, pushed back its quarterly report from Monday to Wednesday.

But some companies, such as Burger King Worldwide (BKW) and CommVault Systems (CVLT), still released their quarterly results on Monday. Burger King, a June IPO with a weak IBD Composite Rating of 45 out of a best-possible 99, posted profit and revenue that beat estimates. CommVault, No. 49 in Monday’s IBD 50, blew away Wall Street’s estimates.

Despite Sandy-related closures for government offices, the Commerce Department managed to release data showing personal spending bumped up 0.8% in September, topping forecasts for a 0.6% gain. Personal income edged up 0.4%, better than the 0.1% increase in August and in line with expectations.

Monday’s market closure represented the first marketwide, unplanned shutdown since the terrorist attacks on Sept. 11, 2001. The market last closed due to weather on Sept. 27, 1985, for Hurricane Gloria. It last closed for two consecutive days due to weather on March 12-13, 1888, for a blizzard.

The Wall Street Crash of 1929 (Black Tuesday)

Black Tuesday refers to October 29, 1929, when panicked sellers traded nearly 16 million shares on the New York Stock Exchange (four times the normal volume at the time), and the Dow Jones Industrial Average fell -12%. Black Tuesday is often cited as the beginning of the Great Depression.

The years before Black Tuesday were filled with irrational exuberance. The Dow Jones Industrial Average nearly doubled, rising from 191 in early 1928 to 381 by September 3, 1929. Stock prices had risen across the board, even for companies that posted little profit. Prices then began falling slightly, as investors started to take profit.

On October 10, 1929, the Dow Jones Industrial Average closed above 350 for the first time in ten trading days. This rally sparked profit taking, and the Dow Jones Industrial Average began falling again amid the selling. The selling became intense on Wednesday, October 23, and the market fell -6.3%. By October 24, Black Thursday, the selling frenzy reached a critical mass and by Black Tuesday it turned to flat-out panic.

The trading volume got so high that it delayed the ticker tape by more than an hour, which created confusion and anxiety. Some exchanges were so overwhelmed that they closed early. The Dow Jones Industrial Average closed at 230.07 on Black Tuesday. From Black Thursday to Black Tuesday, stocks lost more than $26 billion in value and over 30 million shares traded. After that dismal week, prices continued to fall, wiping out an estimated $30 billion in stock value by mid-November 1929.

Black Tuesday is often associated with stories of investors and traders jumping out of windows after losing everything. Black Tuesday and the days surrounding were especially painful for investors who had borrowed money to purchase stocks that had become worthless or close to it. The situation influenced what became a major turning point for the U.S. economy, because many of these borrowers, who had leveraged themselves considerably in an effort to participate in the bull market, were ruined financially. They had to sell everything to pay back their debts, and many couldn’t pay them back at all. Thousands of banks failed as a result. Businesses closed, as they were unable to get credit, and the nation’s disposable income fell precipitously.

Historians often cite Black Tuesday as the beginning of the Great Depression because it marked not only the end of one of the nation’s greatest bull markets, but the end of widespread optimism and confidence in the U.S. economy. Many investors had equated the health of the stock market with the health of the economy, but Black Tuesday challenged this premise.

As with many market reversals, the causes are numerous, intertwined, and controversial. For example, many cite the September 1929 passage of the Smoot-Hawley Tariff Act, which placed high taxes on many imported items, as a major contributor to the market’s instability. Others note the huge amount of leverage investors had used to buy stocks, and some cite the scandal-ridden recall of British funds invested in the U.S. and the September 26 spike in the Bank of England’s discount rate. Besides the dramatic effect on investor psychology, the events of Black Tuesday contributed to the creation of a variety of new laws, organizations, and programs designed to improve the country’s infrastructure, further social welfare, and prevent corporate fraud and abuses. These included the establishment of the Federal Depository Insurance Corporation (FDIC) and the passage of the Securities Act of 1933, the Glass-Steagall Act of 1933, the Securities and Exchange Act of 1934, and the Public Utility Holding Act of 1935.

The panic caused by information delays also spawned faster ticker systems that could handle heavy trading days.