Top 10 Reasons Wall Street Gives for the Stock Market Correction

By now, global stock indexes have fallen around 4-5% from their 2007's highs. No one is quite sure why the correction happened. Certainly not many people predicted that a sharp correction was in the play for this month. So after the correction on Wednesday, many analysts came up with what they think were the causes of the correction. However, it is worth bearing in mind that stock markets are an aggregator of human actions and are hardly predictable. All these reasons are in hindsight and the reasons for any further corrections in the market might not be the same reasons.

1. The Greenspan Effect
He said "it was "possible" the U.S. economy would go into recession in the second half of 2007." Given that Greenspan was the previous US Federal Reserve Chairperson; his words do hold sway over the stock market. But whether if his words were coincidental timing or words of wisdom, it is hard to know.

2. News that the State Council, China's highest ruling body, approved a special task force to clamp down on illegal share offerings and other banned activities in the market. This piece of news created quite a bit of negative sentiment in the markets. Which then lead to China's Shanghai Composite Index dropping almost 9 percent on fears that the government would crack down on speculation that has driven stock prices there to record highs.
Another case of a high authority muttering words that had a large effect on the economy. This correction also marks the first time that a correction is China's stock market affecting global equity markets.

3. Investors might be taking profits as the Shanghai Composite index had been up over 100% in CNY terms in 2006.
You often see profit taking as a reason for correction. If you read financial news regularly, you will notice that this reason is always taken out as an excuse for a low of downward movement in the markets.