The Markets This Week
WALL STREET HAS BEEN LOOKING TO President Obama for change, only to balk when change is meted out.
The mounting pace of reform from Washington — an ambitious $3.6 trillion budget, for instance, and a blueprint for propping up Citigroup (ticker: C) — failed to slow the pace at which the stock market hit one record after another. Stocks suffered their worst February since 1933. The 43% decline over the past six months was the worst such stretch since 1932.
The measured selling sent stocks to a 12-year low, close to levels from which previous bull markets had sprung. Friday's decline was the ninth loss in 10 days, surely improving the odds of at least a momentary bounce off this morose spell. But the orderly wilt — and the relative absence of panic — reduces the likelihood of a sustained rally.
"Mega bear markets typically do not end before they retrace substantially more than 100% of the bull market that precede it," warns one Wall Street technical analyst. And at 735, the S&P 500 is just slightly below the 768 starting line from which the last bull market took off in October 2002.
The Dow Jones Industrial Average ended the week down 303, or 4.1%, to 7063, its lowest since May 1997. The S&P 500 absorbed its seventh loss in eight weeks. It is 53% off its 2007 peak. The Nasdaq Composite Index fell 63, or 4.4%, to 1378, while the Russell 2000 slipped 22, or 5.3%, to 389.
Selling pressure has eased compared to the rabid asset dumping seen last October. The number of stocks plumbing fresh lows, for example, is a mere fraction of that seen last fall. Yet the S&P 500 is 13% lower more than four months later. February's decline also was the worst monthly loss since October — a worrying sign that slippage might pick up anew.
Will the government manage to revive the American economy? The anticipated date for such a revival keeps getting pushed further out. Meanwhile, the attempt is causing no end of pain now (source: Barrons Online).
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