Somewhat Encouraging
By Pejman Yousefzadeh Posted in Economic Performance | Economy — Comments (1) / Email this page » / Leave a comment »
I am not one of the doomcriers when it comes to the economy, but it is clear that we need all the good news that we can get when it comes to matters financial and economic. Here's some:
Stocks were mostly higher Wednesday after a Federal Reserve report showing economic growth at the end of 2007 appeared to quiet some worries of a precipitous slowdown in the economy.
The modest rebound from a sharp pullback Tuesday came after Wall Street spent most of the session fluctuating while investors combed through corporate profit reports and news that supported varying views about the economy's well-being.
Stocks gained after the Fed report -- its Beige Book survey of regional economies -- suggested economic activity increased modestly from mid-November through December, though at a slower pace than in a previous survey.
The report seemed to quell some concerns about prospects for the economy that took on new urgency after Intel Corp. issued disappointing earnings after the closing bell Tuesday.
The Fed's report bolstered enthusiasm among bullish investors who pointed to results from JPMorgan Chase & Co. and Wells Fargo & Co. The banks' reports appeared to remind Wall Street that while the fallout of souring loans was widespread, it wasn't necessarily evenly felt. And buyout news in the tech sector gave a boost to investor sentiment.
Developing . . .
...but the wire story you quote was evidently written too early in the day. The US stock market shook off its small burst of enthusiasm (which more likely was a bit of short-covering or bargain hunting) and ended the day with another loss.
For what it's worth, the news background this morning (Thursday) is quite favorable and US stocks look set to rebound a little.
There's a lot of noise coming out of the Federal Reserve this morning, about them being ready to support a Keynesian stimulus program. This ought to benefit the stock market, if it happens.
The stock markets are only indirectly driven by questions about the US economy. What they measure more directly is the outlook for corporate earnings growth. As it turns out, these are not quite exactly the same thing.
With the outlook for earnings just as opaque as that for the economy as a whole, the stock market is going to get jerked around.
As regards volatility (the effect that results in wild swings of hundreds of points within a day and nearly ten percent in a month, with no particular fundamental changes to account for them): this appears to be a relatively new and permanent feature of world markets. It's caused mostly by some technical factors internal to the markets themselves.