Economic News and Market Downturn
The DOW is down nearly 200 points as I pen this quick message and the S&P has finally broke through key downside resistance. Looks like the markets, this week, have finally woken up to the issues that we’ve been talking about for quite some time.
Some of the major concerns that have come to light over the past few days—several of the catalysts for recent negative market reactions:
ISM Index (Manufacturing Activity) drops to 47—below 50 is bad/contracting
US blue-chip stocks on Wednesday suffered the worst start to a new year in 25 years after an index of manufacturing fell sharply, raising fears that the US economy is slowing more than expected.
Jobless Rate rose to 5%--even w/skewed data from BLS birth-death model
Hiring practically stalled in December, driving the nation's unemployment rate up to a two-year high of 5 percent and fanning fears of a recession.
Employers last month added the fewest new jobs to their payrolls in more than four years, according to the employment report released Friday by the Labor Department. The report showed that employment conditions are deteriorating, strained by a housing slump and credit crunch that are sapping economic strength.
"The economy is getting hit by some body blows. The big question is whether the economy can withstand it or will it take a fall," said Ken Mayland, president of ClearView Economics.
GM, Ford, Toyota December Sales Fall—Worst Year in a Decade
General Motors Corp., Ford Motor Co. and Toyota Motor Corp. said U.S. auto sales fell in December, capping the worst year in a decade, and predicted that 2008 probably won't be any better.
Consumers are curtailing spending after being hammered by $3-a-gallon gasoline prices. Housing starts, a barometer for sales of profitable trucks, are in the deepest slump in 16 years.
``It's going to be a brutal year for autos; we're headed into a recession,'' said Pete Hastings, a fixed-income analyst at Morgan Keegan & Co. in Memphis, Tennessee.
Ford Stock Price @ 22 year low after losing #2 spot to Toyota
Ford Motor Co. fell to the lowest price since 1986 in New York trading after losing its status as the No. 2 seller of autos in the U.S. for the first time in three-quarters of a century.
Ford slid as much as 7 percent to $6 today, a day after posting a 12 percent drop in U.S. sales and forecasting a ``challenging'' 2008. Toyota Motor Corp., which modeled itself after Ford following World War II, has now overtaken the Dearborn, Michigan-based automaker on its home turf.
Past due payments on consumer loans UP—highest since 2001
Americans are falling further behind on consumer loans, with late payments rising to the highest level since the nation's last recession in 2001, data released Thursday show.
In its quarterly study of consumer borrowing, the American Bankers Association said the percentage of loans at least 30 days past due rose to 2.44 percent in the July-to-September period from 2.27 percent in the previous quarter.
The delinquency rate was the highest since a 2.51 percent rate in the second quarter of 2001. Late payments on some types of loans rose to levels not seen since the 1990s.
The ABA attributed some of the summer increase to rising oil prices and the inability of thousands of homeowners to keep up with mortgage payments.
"Those little expenses that keep sucking dollars out of wallets every month are what have the most impact on people's ability to pay their consumer loans," Chief Economist James Chessen said in an interview
So what can we expect the Markets to do next week?
I expect to see a small recovery on Monday, but numerous economic releases due later in the week will probably intensify today’s decline.
Due Next Week:
- Pending Home Sales
- Consumer Credit
- Initial Claims
- Wholesale Inventories
- Import/Export Prices
- Crude Inventories
BREAKING NEWS! Looks like the Fed is becoming more concerned w/Credit Crisis
Fed Ups Auction Amounts to Aid Banks
The Federal Reserve announced Friday that it is increasing the amount of money available to banks through the new auction process it created to ease the nation's severe credit squeeze. The Fed again pledged to continue the auctions "for as long as necessary."
The Fed said that it will increase the amount offered at each of the next two auctions from $20 billion to $30 billion, a 50 percent jump. Those two auctions will be Jan. 14 and Jan. 28.
So, will the Fed cut rates again at the end of Jan?
ABSOLUTELY! My Bet is 50 Basis Points. We may even see an emergency rate cut beforehand.
Post Updated at 14:30--Added new Peter Schiff Video (Discussing Markets); Very Smart guy and I agree with many of his points (even read his book), but don't agree that foreign markets will decouple and withstand the downturn--Decouple yes, but I think it will take many years
Have a great weekend!