U.S. Stocks Tumble: Some Comparisons from Past Recessions - Page 4

donsutherland1 · 07-11-08, 08:02 AM

Stock market poised for a rocky opening…

● Oil: Earlier this morning, the price of crude oil reached a record $146.90 in electronic trading due to renewed Middle East tensions and potential disruptions in Nigeria.

● Trade deficit: The nation’s trade deficit for May amounted to $59.790 billion. That was below April’s $60.498 billion figure and below the consensus forecast for a $62.4 billion figure. However, for the first time on record, oil imports accounted for more than 50% of the U.S. trade deficit. Oil imports came to 52.3% of the U.S. trade deficit. For 2008, oil has accounted for 46.4% of the trade deficit. During the same period last year, oil imports comprised 27.9%

● News that the federal government is reviewing options for placing either Fannie Mae or Freddie Mac or both under conservatorship has sustained the sharp decline in share prices for those two giant government-sponsored enterprises that hold approximately half of the nation’s mortgage debt. In pre-market trading, shares of both GSEs had fallen more than 40% from yesterday’s closing figures. U.S. Treasuries were also trading lower on this news possibly reflecting the impact the move could have on the national debt from a contingency perspective.

● On the inflation front, U.S. import prices surged 2.6% in June vs. the consensus forecast of 1.9%. The sharp rise in the price of crude oil played a leading role in that development.

Additional news will play a role in shaping the outcome of trading. Nevertheless, the Fannie Mae and Freddie Mac issue will likely loom large given the magnitude of risk associated with these entities. New lows for this year for both the Dow Jones Industrials and S&P 500 are possible. Their lows are 11,147.47 for the Dow and 1,244.69 for the S&P 500. Those figures are the lowest since August 14, 2006 for the Dow and July 21, 2006 for the S&P 500. Depending on developments associated with the two major GSEs, a decline that takes the Dow Jones Industrials below 11,000 cannot be ruled out.

donsutherland1 · 07-11-08, 09:17 AM

In the first 30 minutes of trading, the Dow Jones Industrials fell as much as 180.50 points to 11,048.52 and the S&P 500 declined as much as 18.78 points to 1,234.61. Just prior to the opening of stock market trading, oil reached as high as $147.27 per barrel.

Since then, stocks have pared losses on a somewhat better-than-anticipated consumer sentiment reading of 56.6 vs. the expected 55.5 reading. Just after 10:15, the Dow was down 111 points and the S&P 500 was down just over 9 points.

One-year inflation expectations rose to 5.3 percent from June's 5.1 percent, their highest figure since 1981.

Five-year inflation expectations remained at 3.4 percent, its highest figure in 13 years.

donsutherland1 · 07-11-08, 03:16 PM

The Dow Jones Industrials fell to 11,100.54. That is its lowest close since the Dow closed at 11,097.87 on August 14, 2006.

To date, the Dow Jones Industrials has now fallen 21.6% from its October 2007 peak of 14,164.53. In inflation-adjusted terms, the Dow is now 24.9% below its peak.

The S&P 500 closed at 1,239.49. That is its lowest close since July 18, 2006 when it closed at 1,236.86. To date, the S&P 500 has now fallen 20.8% from its October 2007 peak of 1,565.15. In inflation-adjusted terms, the S&P 500 is now 24.1% below its peak.

At one point this afternoon, the Dow Jones Industrials was trading as low as 10,977.68, down 251.34 points from yesterday’s close. However, later in the afternoon news that the Fed had indicated that it would grant both Fannie Mae and Freddie Mac access to its discount window briefly triggered a rapid recovery in stock prices. For a brief moment, the Dow Jones Industrials was up 12.05 points and the S&P 500 was higher by 3.88 points. Nevertheless, the reality that the fundamental risks confronting the two GSEs had not changed, along with a near-record closing price of $145.08 per barrel for crude oil, cut off the short-lived rally and stock prices again descended.

donsutherland1 · 07-14-08, 09:47 PM

Data-filled Day Looms…

On Monday, the Dow Jones Industrials fell to 11,055.19. That is its lowest close since the Dow closed at 11,051.05 on July 24, 2006.

To date, the Dow Jones Industrials has now fallen 22.0% from its October 2007 peak of 14,164.53. In inflation-adjusted terms, the Dow is now 25.2% below its peak.

The S&P 500 closed at 1,228.30. That is its lowest close since June 13, 2006 when it closed at 1,223.69. To date, the S&P 500 has now fallen 21.5% from its October 2007 peak of 1,565.15. In inflation-adjusted terms, the S&P 500 is now 24.8% below its peak.

Tuesday will experience a blizzard of economic data on manufacturing output, retail sales, and producer prices released prior to the opening of trading.

• Producer Price Index: The producer price index for June will be released at 8:30 am EDT. It is likely to show a continuation of inflationary trends in the food and energy area. One thing to watch will be whether the early indications of a spillover into the broader economy shown on the May reading are confirmed in June’s data.

• Retail sales: The June retail sales figure will be released at 8:30 am EDT.

• New York State’s Manufacturing data: Also, at 8:30 am EDT, the New York Federal Reserve will release data concerning manufacturing output in New York State. The consensus forecast is for a continuing contraction of manufacturing output.

As the day wears on, additional developments could influence trading. At 10:00 am EDT, the business inventories information will be released. The relationship between the retail sales data and inventories data could be revealing as to whether inventories are beginning to pile up (usually a sign of slower output in the future) or inventory growth is lagging retail sales growth (usually a sign of faster production in the future).

Beginning at 11:30 am, EDT, U.S. Secretary of Treasury and Federal Reserve Chairman Ben Bernanke will testify before the Senate Banking, Housing, and Urban Affairs Committee. In addition to its covering the state of the economy, inflation, and monetary policy, both the Fed Chairman and Treasury Secretary are likely to discuss the state of the nation’s financial system and the troubles plaguing Fannie Mae and Freddie Mac.

donsutherland1 · 07-15-08, 08:57 AM

Morning Data: A Hint of Stagflation?

This morning's data offered a possible hint of stagflation. Even as the economy showed signs of slowing with retail sales rising just 0.1% in June and 0.8% excluding autos, two reports showed quickening inflation.

The Producer Price Index (PPI) increased 1.8% for June. That was well above the consensus forecast of 1.4%. Moreover, the change from June 2007 amounted to 9.2%. That is the highest year-over-year change since June 1981 when the PPI registered a 12-month change of 10.1%.

The New York Federal Reserve's Empire State Manufacturing Survey also revealed rising inflation pressures even as that index contracted for another month. The survey revealed:

The prices paid index shot up 12 points to 77.9, a new record, with 79 percent of respondents reporting higher prices. The prices received index, which had jumped in June, rose further in July, to a record-high 32.6. Forty-one percent of respondents said that they had raised prices.

Earlier in the morning, the U.S. dollar fell to a record low against the Euro. Should worries about the health of the U.S. financial system and the trajectory of its overall economy worsen, the falling dollar could provide a fresh round of inflationary pressures.

This morning's testimony by Fed Chairman Ben Bernanke on the state of the economy (10:00 am EDT) and later his testimony and that of Treasury Secretary Henry Paulson (11:30 am EDT) will likely be widely monitored by market participants for indications concerning the economy and health of the nation's financial system.

donsutherland1 · 07-15-08, 03:12 PM

Dow closes below 11,000 for the first time since July 2006, S&P at lowest close since November 2005…

After being battered by a gale of bad news punctuated by a roaring Producer Price Index, anemic retail sales growth, and a continuing decline in manufacturing activity in New York State that sent the Dow Jones Industrials to as low as 10,827.71, the testimony of Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson provided a dose of confidence to the anxiety-swept markets. The storm of selling abated. The gloom lifted. By early afternoon, stocks had returned to higher ground with the Dow rising to as much as +68.48. However, just as had been the case yesterday, the respite was only temporary. A sharp wave of selling in the closing 30 minutes drove stocks solidly into the red.

Today, the Dow Jones Industrials closed at 10,962.54. That is its lowest close since the Dow closed at 10,868.38 on July 21, 2006.

To date, the Dow Jones Industrials has now fallen 22.6% from its October 2007 peak of 14,164.53. In inflation-adjusted terms, the Dow is now 25.8% below its peak.

The S&P 500 closed at 1,214.91. That is its lowest close since November 2, 2005 when it closed at 1,214.76. To date, the S&P 500 has now fallen 22.4% from its October 2007 peak of 1,565.15. In inflation-adjusted terms, the S&P 500 is now 25.6% below its peak.