Double-dip recessions may already be fact in some countries.
Wednesday, March 3, 2010. 9:15 am.
Worries about a double-dip global recession have been rising in recent weeks. They began with the surprise report a month ago that GDP growth in the 16 Eurozone countries had declined to just 0.1% in the fourth quarter.
In recent days Sweden reported its economy did slide back into recession in the fourth quarter, its GDP growth coming in at minus 0.6%, (compared to its central bank’s forecast of 0.5% GDP growth), while Sweden, Denmark, and Norway reported unexpectedly slower fourth quarter growth.
With the additional problems in global economies so far this quarter related to the debt crises in Dubai, Greece, Spain, Italy, Portugal, Ireland, etc., it doesn’t seem that conditions are improving this quarter.
The double-dip worry has spread to the the U.S. on recent negative economic reports. New home sales plunged 11% in January. Existing home sales fell 7.2%. Durable Goods Orders ex-aircraft fell 0.6%. Consumer incomes grew only 0.1% in January, the smallest rise in four months. Construction spending fell again in January, down 0.6%. Reports for February have continued the trend with Consumer Confidence plunging sharply in February, while the ISM manufacturing index fell to 56.5 in February from 58.4 in January.
Nobel prize winning economist Paul Krugman has been saying since December that the possibility of the U.S. economy sliding back into a double-dip recession in 2010 is “not a low probability event. Odds are about 30% to 40% of it happening.” He believes the catalysts will be the wind down of government stimulus programs, and businesses having completed the inventory rebuilding that boosted 4th quarter GDP.
It’s not just academics who are concerned.
Jamie Dimon, chairman of JP MorganChase, says a double dip in the economy is quite possible. Dimon adds that he believes a larger problem than the debt crisis in Greece and other European countries might be the debt crisis in California if it worsens, given the size of California’s economy and the potential for a ripple effect across the country.
We really need to see some positive surprises in economic reports fairly quickly to counter these worries about a double-dip.
Perhaps in the jobs numbers over the next few days?
Goldman Sachs’ trading profits set record!
The big profits major financial firms make from short-term trading for their own accounts, and the huge bonuses their traders receive for producing those profits, have certainly been in the headlines over the last year.
The latest SEC filing from Goldman Sachs shows that in 2009 the firm made more than $100 million in one day on 131 days. That’s an average of about every other day. It lost money on only 19 days, and Goldman reported that none of the losses on losing days exceeded $100 million. (For the year the firm reported earnings of $13.4 billion from all sources).
Last year’s trading performance broke its previous record, set in 2008 (when the bottom was dropping out of the financial sector, and the financial system was close to total collapse). In 2008 Goldman Sachs made more than $100 million in one day on 90 days.
Ah yes, but these financial firms advise public investors to just buy and hold because the market cannot be timed and too much trading ruins performance.
Yesterday in the U.S. stock market.
A rally from the open until 11 a.m. then a giveback in the afternoon.
Two troublesome patterns: Strength in the morning giving way to selling in the afternoon.
And strength in the small stocks of the Russell 2000, home of small investors, and weakness in the blue chips, where institutions and professionals have their holdings. (Due to the size of their portfolios they can’t get enough invested in small stocks, both due their low prices and the relatively few shares that are available, to amount to any percentage of their holdings). Not often a good sign when small investors are confident and buying, while institutions and large traders are cautious and selling quickly into strength.
Yesterday’s intraday chart:
The Dow closed up 2 points, or 0.0%. The S&P 500 closed up 0.2%. The NYSE Composite closed up 0.5%. The Nasdaq closed up 0.3%. The Russell 2000 closed up 0.9%. The DJ Transportation Avg. closed down 0.5%.
Asian markets mostly closed up last night.
Among individual countries:
Australia closed up 0.7%. China closed up 0.8%. Hong Kong closed down 0.1%. India closed up 1.4%. Indonesia closed down 0.4%. Japan closed up 0.3%. Malaysia closed down 0.2%. Singapore closed up 0.3%. South Korea closed up 0.4%. Taiwan closed up 0.4%.
If you’d like to see a three-month chart of these indexes and others, click here, and then click on any of the markets in the list at the left side of the page it takes you to.
Note; Our data-feed comes in automatically from Reuters and is doubled-checked with the data-feed from eSignal. Often when markets are closed they don’t show that but transmit the data from the last close. That’s why when you watch the tape on CNBC and websites, you often see that a market supposedly closed up or down the previous day, when in fact that market was closed for a holiday. That is why sometimes you see the same thing with our sampling of individual global market closes. It is the data from incoming data-feeds.
Markets this morning.
European markets are up fractionally, on average of about 0.3%.
Oil is up $.53 a barrel at $80.21.
Gold is up $1.60 an ounce at $1,139. Gold is up $23 an ounce, more than 2% so far this week.
Markets in the U.S.
In the U.S., this week’s important economic reports continue to come out. To see the full schedule of the week’s reports click here, and look at the left side of the page it takes you to.
Last week it was that the Conference Board’s Consumer Confidence Index plunged sharply in February; New Home Sales plunged 11% in January; Existing home sales fell 7.2%; Durable Goods Orders ex aircraft orders fell 0.6%; and unemployment claims rose 22,000 last week, the second straight weekly rise. But the revision of 4th quarter GDP to 5.9% GDP growth from 5.7% was a positive, exactly in line with economists’ consensus estimate.
So far this week it has been that consumer incomes rose 0.1% in January, the smallest rise in four months, while spending rose 0.5%, the highest pace since May, 2008. The ISM Mfg index declined to 56.5 in February from 58.4 in January. And Construction Spending fell again in January, down 0.6%.
This morning the ADP employment report was released at 8:30 and was that only 20,000 jobs were lost in February. But the report’s viability and ability to forecast Friday’s important Labor Department jobs report was again thrown into question, when the last ADP report, for January, which showed only 22,000 jobs were lost in January was revised to a loss of 60,000 jobs.
Still to come, the ISM non-mfg index will be released at 10 am, and the Fed’s Beige book at 2:30 p.m.
The ADP had only a minor positive effect on the pre-open indicators.
Our pre-open indicators are somewhat positive, pointing to the Dow being up 25 points or so in the early going.
Stock Market Patterns.
The current pattern is the ‘Monthly Strength Period’, which was due to begin last Friday and to run through this Thursday (March 4). Its tendency to be positive is quite persistent in bull markets, not so often in bear markets.
Interesting Charts of the Morning.
I’m sorry but I don’t have time to provide interesting charts this morning.
Please scroll down to see recent charts and commentaries, especially those of Friday and Saturday.
To read my weekend newspaper column ‘Is the Stock Market Saying the Economy Will Remain Strong?’ click here!
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