So what was the deal with yesterday? We had another massive drop in the stock market; the Dow was -733.08 points, Nasdaq -150.68 and the S&P -90.17. That makes for another 7%+ drop on each index. And as I write this, the Nikkei (Japan) is down almost 10%. European indexes are expected to follow suit.
Does not look so good… So what happened? Here’s a quick recap:
- The Federal Reserves Beige Book came out yesterday - it is a report that summarizes the Fed’s findings on the pulse of the economy. The report said that the markets, in all twelve Fed districts (meaning every part of the country), have shown signs of economic weakening. Businesses and consumer spending is down across the board and it is expected to continue.
- At the Economic Club of New York, Bernanke (the Federal Reserve Chairman) gave a speech about the economy. He had a lot to say, but what everyone has chosen to focus on is how he said that the “broader economic recovery will not happen right away…”
- Janet Yellen, the San Francisco Federal Reserve president flat out said that the economy appeared to be in a recession… the first to openly acknowledge it and use the “R”-word.
- JP Morgan Chase (the bank that acquired WaMu) reported that it’s profits were down 84%, mostly due to write downs that it had to take from WaMu’s bad debts. Wells Fargo and American Express also posted lower profits or write downs.
- A few economic indicator reports came out yesterday. Economic indicators are simply the health stats of the economy. Each report reinforced that consumer spending is down as compared to a year ago, prices are up, and that manufacturing was a lot lower than expected.
- A slew of other financial reports and economic data are due out today, including the consumer price index, jobless claims and earnings reports from companies like Citibank and Google. Friday, the housing starts and consumer sentiment reports are due. And judging by the trend, people expect the data to show similar results.
In a nutshell:
Yesterday was a big restatement of things we already knew. The economy isn’t too hot right now and it’s not going to get better overnight.
People just don’t like to hear that.
~K
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