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Quote of the Day
“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so”
April 2nd – This Day in Stock Market History
April 2nd, 1993 – Phillip Morris stock plummets 23% on the day – A day which became known as “Marlboro Friday”.
The sharp decline stemmed from a surprise announcement that Phillip Morris was cutting prices on its iconic Marlboro brand. At the time, Phillip Morris controlled 22% of market share, but that had been slowly declining from nearly 25% a few years prior.
This day’s decline would wipe out $13 billion of the company’s market cap. It was the largest single day market cap decline of any company since 1987.
It would take about 2 years for the company’s stock price to recover.
(Prices in the chart below are split adjusted)
April 2nd, 2007 – The first major sign of trouble in the housing crisis as New Century Financial declares bankruptcy.
At the time it was the largest subprime lender in the nation, and wrote more than $51 billion in mortgages in 2006.
“The industry’s woes have raised fears that trouble could spread to the wider mortgage market and dampen U.S. economic growth if consumer confidence and spending were to shrink. But the Federal Reserve chairman, Ben Bernanke, told Congress last week [On March 28th] that the weakness “does not appear to have spilled over to a significant extent”….While there had been warnings in the industry for years that it was growing too big, too fast, the first real cracks began to emerge last fall as some subprime lenders began reporting increased rates of delinquencies among recent borrowers. Soon, smaller subprime lenders such as Ownit Mortgage, began filing for bankruptcy protection.”
Slowly the dominoes would continue to fall. October 9th 2007 would mark the top of the Dow’s rise, and U.S. stock markets would fall more than 50% mostly due to the effects of bad subprime mortgages.
Best April 2nd in Dow Jones Industrial Average History
1938 – Up 3.00%, 3.09 points.
Worst April 2nd in Dow Jones Industrial Average History
1993 – Down 2.00%, 68.63 points.
Read of the Day
Michael Lewis wrote a best selling novel on the U.S. economy and stock market during the subprime crisis. (It has also been turned into a movie):
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