Markets Fall on Drumbeat of Grim Reports

An outpouring of negative economic and financial reports soured the mood on Wall Street Friday as banks and other lenders further tightened credit in their struggle to contain damage from losses on mortgages, business loans and related debt.

Shares sank, and investors fled to the safety of Treasuries as the Standard & Poor’s 500-stock index fell 2.71 percent and the Dow Jones industrial average dropped 315.79 points, or 2.51 percent, to 12,266.39. Both indexes capped their worst four months since 2002.

Prices of municipal bonds, bank loans and high-yield debt all fell as well.

The markets for ultrasafe debt backed by the federal government and other nations were alone in posting gains. Some commodities, including gold, were also up.

“The drumbeat of economic news has been unrelentingly bad,” said Edward Yardeni, a normally upbeat investment strategist. “The recession scenario is looking more and more credible.”

Read it all.

John Mauldin has more on this, including the following:

Let’s look at 10 recent items which have come across my screen, which I think leave little doubt that we are in a recession. (It could just as easily have been 20, but I think 10 are enough to prove the point.) In no particular order:

1. After hovering above 50 in recent months, the Chicago ISM number dropped sharply to 44.5 in February, notching its lowest reading since December 2001 and coming in well below expectations. This brings this survey in line with the disastrous services survey of last month.

2. The University of Michigan Consumer Sentiment Survey for the United States came in at 70.8. This is the lowest reading for the index in 16 years.

3. “The New York City Purchasing Manager’s Survey fell for the second consecutive month to 427.7 in February. The current conditions index fell to 43.4, down from 47.9 in January. The six-month outlook index was below 50 for the second consecutive month for the first time in the survey’s history; at 47.5 it was down from 70 in February of 2007. The worsening conditions reflect rising prices coupled with slower job growth and layoffs in financial services, as well as tightening credit conditions and higher unemployment.” (

Posted in * Economics, Politics, Economy, Stock Market

6 comments on “Markets Fall on Drumbeat of Grim Reports

  1. Kendall Harmon says:

    This article appears on the top of the front page on the right side of this morning’s New York Times.

  2. okifan18 says:

    Even though President Bush and Ben Bernanke will not say we are in recession, it is obvious to many of us out here in the real world that we are.

  3. Adam 12 says:

    I suppose if interest rates keep fallling a lot of folk will refinance their homes. That could create a lot of cash for consumer spending.

  4. William P. Sulik says:

    Adam12 – I don’t think that will happen. We’re at a funny point — houses were overvalued and are now coming down to where they should be. Inflation is really heating up and I think it will get much worse.

    In fact, I could see a return to double digit inflation if President Obama doesn’t show some back bone in standing up to this. There will be a lot of pressure to raise the minimum wage, which triggers union wage adjustments. Gas will zoom past $4/ gallon which will also lead to food price increases. This will put demand on Pres. O. and Congress to raise federal salaries, leading to larger budget deficits.

    In light of all this, there will be little reason to maintain the Bush tax cuts, taking more money out of the economy.

    My own thought is that you should refinance in the next 6 months, if possible and lock in a fixed rate. If we do hit double digit inflation, this will mean your monthly housing payment will be the only thing actually shrinking relative to the rest of your budget.

    Anyway, I actually stopped by not to comment on these, but just to pass on a nice website, if you haven’t seen it:

    This collects a lot of the news and commentary related to the markets — it’s sort of like Arts and Letters Daily, but for markets.

  5. R. Scott Purdy says:

    “Recession” is a defined term – not a term of art to convey some vague sense of uncomfortable feelings of expectation about the economy.

    A recession is defined as two consecutive quarters of negative growth in GDP. We have not yet achieved that designation.

    Admittedly, GDP figures are “backward looking” and are subject to subsequent refinement, so the announcement of a recession lags the period where the recession occurred. Yet how much greater critcism would be levied (and indeed self-fulfilling damage would be done) if leaders announced a recession when one had yet to occur?

    I beleive when the figures are posted and refined that Feb 28, 2008 will mark the completion of the fourth or fifth month of negative GDP growth. If so, we are not yet in recession, but I fully expect to get there in this cycle.

  6. Kendall Harmon says:

    Unfortunately, #5, that is no longer the agreed definition of a recession. Go to the NBER website for more.