What does the latest drop in stocks mean for the U.S. (and world) economy?

Question

I'm sure we all got the news that the Dow dropped 395 points. But as someone who is still on the young side, never studied econ, I'm not sure what this exactly means for the world economy and our situation here in the U.S. right now. What are the short and long term affects of such a drop and what is considered a "normal" fluctuation of points within a day? I think it's very important to be knowledgeable on such matters but am ashamed to admit that I don't know a whole lot about it.

Answer 1

The stock market will not directly affect the economy. It is rather a reflection of the the economy and the general health of businesses. Bad news about the economy, such as today's $11 jump in oil prices, will spook investors causing a drop in the overall market. The strength or weakness of the stock market is an excellent gauge of investor's confidence in the economy. If you want to become more knowledgeable individual, read the financial section of the newspaper and the online sites such as http://money.cnn.com/.