No Special Contingency Plan in Wings for Monday

The New York Stock Exchange and Nasdaq Stock Market said Friday that they were making no special contingency plans for Monday, despite concerns that the market could suffer another deep dive.

The NYSE and Nasdaq systems can handle far more trading volume than has occurred recently, spokesmen for the markets said.

After market dives in 1987 and 1989, the exchanges implemented “circuit breakers” to temporarily halt trading if stocks plunge. The first trading halt would kick in if the Dow Jones industrials fell 950 points. If the drop occurred before 2 p.m. EDT, trading would be suspended for an hour. The markets would halt for 30 minutes if the 950-point threshold was reached between 2 and 2:30 p.m., but there would be no halt if it occurred after 2:30 p.m. Regular closing time is 4 p.m.

A Federal Reserve spokesman declined to comment on whether the central bank was taking any precautionary steps. A spokeswoman for the Securities and Exchange Commission said the agency closely monitors the readiness of the markets to handle volume spikes, but refused to comment further.

Buffett Says Market May Remain Out of Sync

Billionaire investor Warren Buffett said Friday that he believed the stock market could remain “out of sync” with the U.S. economy for a long time.

“It would not surprise me if there was a long period of stagnation

“We’ve had this history where the market gets out of sync with the business world for long periods of time; usually it’s because it overshoots in one direction and then over-corrects in the other,” Buffett said.

The stock market bubble in the late-1990s was, in many respects, the greatest in U.S. history, driving stock price-to-earnings ratios to levels never seen before. Now, the question is whether investors will drive stock valuations far below what might otherwise be considered fair, experts say.

Buffett advised small investors to sit out the market for a while or invest in a low-cost stock index fund for the long term.

Reuters

Bear on Magazine Cover

Seen as ‘Buy’ Indicator

There’s a Big Bad Bear on the cover of the latest BusinessWeek magazine. Some on Wall Street say that’s a sure sign that it’s time to buy stocks.

The “magazine cover indicator” is a favorite of contrarian investors. They say that when popular magazines have a bear as a cover boy, the gloom has reached its peak, and there are few investors left to sell.

The cover of BusinessWeek’s July 29 issue features a ferocious grizzly.

“From a contrarian perspective, this is a positive sign,” Banc of America Securities’ strategist Tom McManus told clients in a note.

Reuters