Post-Thanksgiving Gut Punch
Kurt Brouwer December 1st, 2008
Last week’s rally seems like a distant — though fondly remembered — memory after today’s market decline. David Gaffen at the Wall Street Journal’s MarketBeat Blog aptly called it a gut punch:
Four at four: Post-Thanksgiving Gut Punch (MarketBeat Blog, December 1, 2008, David Gaffen)
Can the market walk this one off? A pullback had to be expected after the S&P gained 19% in a brief five-session flurry beginning November 21, but this is more than was requested, and suggests, again, that investors had been riding a bear-market rally, one that was designed to suck in a handful of believers and blow them up, but good. Overseas markets, a terrible report from the Institute for Supply Management on the manufacturing sector, and a safe-haven flight from equities contributed to the losses. Fed Chairman Ben Bernanke also played a part, saying more rate cuts may be on the way, which may have undermined stocks because his words suggest economic weakness (and previous cuts have not been able to support markets for more than a little while). Citigroup lost 22% and General Electric dropped nearly 10%. On a day when the market learned that the economy officially entered into a recession one year ago, thus already making this the longest contraction since 1982, the ISM survey brought into focus just how terrible a quarter the fourth one is going to be. Macroeconomic Advisors was already expecting a 4% decline in GDP in the fourth quarter, prior to this report, and this one confirms the ongoing sour picture. There’s an old saw about the market beginning a recovery some months before the economy does, and that is well true. Economic data may not begin to improve for several more months — but it does have to stop getting worse for the market to gain a fitting [Ed: I think he meant a footing and just mistyped]…
Fed Chairman Ben Bernanke gave another speech today. I wish someone would tell him to lay off the speeches for a while. Every time he gives one, it seems the market tanks. It’s really not his fault, but he could give it a rest for a while.
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