January 26, 2009
U. S stock markets rose again today. The
NASDAQ gained 12.7
ending at 1,489. The
to close at 8,116. The S&P
500 climbed 4.62 points
to 837. Oil slipped
slightly to $45.80 a
barrel, and gold added
to end at
ounce. The VIX fell
1.58 to 45.69.
was good news and bad news today. The good news is that (1) the leading economic
indicators rose 0.3% in December, mainly due to the "'continued and very
large' contribution from the real money supply, while weakness in building
permits and elsewhere persisted." Economic
Report: December leading indicators rise; 'intense' downturn seen .
Also, there was a 6.5% drop in the overhang of unsold houses: U.S.
Dec. existing-home sales rise 6.5% as prices plunge. Two
other pieces of good news are that the prices of oil and gold have both been
rising lately, signaling an expectation of inflation (and presumably, of
recovery) later this year. In another sign of the times: Currencies:
Dollar under pressure as risk aversion abates. This also seems to suggest
that financial mavens think that this economic crisis will be contained.
The bad news is that as of noon today, 50,000 layoffs had been announced in one
cuts on bloody Monday. For example, Caterpillar announced 20,000 layoffs,
and the Home Depot announced 7,000. Texas Instruments will eliminate 3,400. IBM
has just issued 2,800 pink slips. (My guess would be that the actual number may
be substantially higher by the end of the day.) This is the largest number of
job cuts in one day since 1939 (but note that today's population is much larger
than it was in 1939). "Clearly
it's a sign that they [the companies shedding workers] believe the recovery is
not right around the corner," said Jeffrey Kleintop, chief market
strategist, LPL Financial.
One important consideration about all this is that if the
economy continues to get worse, that in itself won't torpedo the stock markets.
It will take an unexpected air pocket in the 6- to 9-month outlook to scuttle
the markets. Right now, that doesn't seem to be happening. The markets managed
to eke out small gains today in spite of the massive layoff announcements. Why
the markets haven't gone south is something that may become more apparent over
the next week or two.
all this, we need to get some hard, cold job creation out of a potential
stimulus package or the market may take another nose dive," said Greg Pai,
a managing director with Paradigm Asset Management.
This audio interview, David
James: Today's economic pain is necessary,
conducted by Marketwatch' Andrew O'Day, contains the interesting observation
that in December, most analysts thought that the economy would bottom in the
middle of 2009, but now the prevailing view is shifting to a 2010
recovery.That's not the message I've been getting. As I've stated below, the
consensus I'm reading is that the economy will bottom in the middle or the third
quarter of 2009, followed by a recovery beginning toward the end of this year.
Peter Brimelow cites three newsletter advisors: Dennis
Slothower, editor of Stealth
and Richard Russell, editor of Dow
Theory Letters:. Not
giving up yet.
Dennis Slothower observes that "There is an unspoken support just above 800
for the S&P 500." (He considers this a bear market rally.) Richard
Russell is waiting on the sidelines. The third is Peter Eliades' Stock Market
Cycles. Mr. Eliades is "bullish on the market, at least for the
Here are Paul Krugman's latest: What’s
in a name?, Permanent
Link to What partisanship means, and Bad