Stocks Skid, Fear Rises, 2011 Gains Evaporate

[웃 910]

Uff da, as they say out in the hinterlands. And that’s not an expression of joy or happiness.

After the ballyhooed Debt Deal got secured JustInTime, the markets decided that things were a pretty big mess anyhow. Economic growth is lackluster, the euro-zone debt problems are intensifying and the Debt Deal probably won’t stop ratings agencies from downgrading the U.S.

The whole smorgasbord of ailments helped drive stocks sharply lower into the closing bell. The S&P 500 moved into negative territory for 2011, the Nasdaq Composite clung to the green and the DJIA — down more than 260 in the day — is up just over 2% year-to-date.

Only a clutch of S&P 500 companies finished with gains today and all 30 DJIA stocks fell. Gold, Treasurys and the dollar rose — a classic fear trifecta.

Big skidders included Micron and JDS Uniphase, each down about 5%. MetroPCS slid 30% after bad earnings, Sprint, which suffered bad results last week, fell another 7% today.

Tiffany lost more than 8%, Abercrombie & Fitch more than 7% and Coach more than 6%. Apparently catering to the Richie Riches isn’t enough in the current market.

Among big Blue Chips, GE, Disney and Home Depot each lost around 4%. Even seemingly invincible stocks had bad days. Apple and Google each lost about 2%.

What worked? Smokes and Gold, a combination that seems out of noir flick. Altria edged higher, as did the SPDR Gold Trust ETF and Newmont Mining.

Two things to expect in the days ahead: More Japan comparisons and more QE3 chatter.

http://blogs.wsj.com/marketbeat/2011/08/02/stocks-skid-fear-rises-2011-gains-evaporate/

[Obama 2012 1,714]

now if only oil would tumble.....

[dalegg 143]

So, they don't like the debt ceiling being raised?

[웃 910]

now if only oil would tumble.....

If stocks keep falling then oil will keep falling imo. They tend to go in the same direction. Stocks bottomed in early 09 and oil was below $40 a barrel then.

Here is a 3 year daily chart of the S&P500 (green/red lines) with light crude oil in solid green.

[Obama 2012 1,714]

If stocks keep falling then oil will keep falling imo. They tend to go in the same direction. Stocks bottomed in early 09 and oil was below $40 a barrel then.

Yeah, but the value of the dollar is also a factor as well at the end of the day.

My biggest problem with oil is the commodity traders try and treat it like gold sometimes and it causes the price to skyrocket.

While I hope that it goes down, I'm also uneasy about the fact that other stocks going down, might cause people to invest in something like oil that holds more value. Especially since a lot of your average traders can't afford gold these days...

[Mr. Big Dog 10,747]

So, they don't like the debt ceiling being raised?

They don't like the cuts agreed and the overall debate on and uncertainty over how much more cutting is coming. They know that the recovery can only slow or even stall if the government pulls back further now - which it seems it will - diminishing whatever weak demand there is. The markets fear austerity, they know what this results in. Growth and more jobs is not what it results in. Deficit reduction is not what it results in. Higher unemployment, less growth, more deficits are on the horizon. Economists have been saying this all along. This reaction is not surprising.

[dalegg 143]

They don't like the cuts agreed and the overall debate on and uncertainty over how much more cutting is coming. They know that the recovery can only slow or even stall if the government pulls back further now - which it seems it will - diminishing whatever weak demand there is. The markets fear austerity, they know what this results in. Growth and more jobs is not what it results in. Deficit reduction is not what it results in. Higher unemployment, less growth, more deficits are on the horizon. Economists have been saying this all along. This reaction is not surprising.

So, out of curiosity lets assume that Republicans didn't win the house last fall and the Senate retained it's 60 Democrats and Independents. With certainty the tax rates for people making above $250,000 would have risen and there wouldn't be as many cuts. Do you think this would have been the end of it, and we would have got Deficit reduction from higher revenues, or do you believe the government would/should have taken the money raised and done another round of stimulus or other type of spending?

[웃 910]

It'd be nice if they made legislation called 'The $7 trillion Bush-Cheney Rollback of the Tax Cuts and Wars Act of 2010' (total deficits caused from just these 2 items 2009-2019).

[I AM NOT THAT GUY 5,715]

So, they don't like the debt ceiling being raised?

Investors are a little brighter than your average congressperson.

[Mr. Big Dog 10,747]

So, out of curiosity lets assume that Republicans didn't win the house last fall and the Senate retained it's 60 Democrats and Independents. With certainty the tax rates for people making above $250,000 would have risen and there wouldn't be as many cuts. Do you think this would have been the end of it, and we would have got Deficit reduction from higher revenues, or do you believe the government would/should have taken the money raised and done another round of stimulus or other type of spending?

Yes, the latter. But smarter. Use public funds to make private industry invest the damn pile of cash they're sitting on. It's called leveraging and it works.

[Niels Bohr 72]

That's what we get when we want cuts, no spending, no tax increases. It would be good when the economy is well to that. In a time when it's not so good, it's a different story.

[dalegg 143]

Yes, the latter. But smarter. Use public funds to make private industry invest the damn pile of cash they're sitting on. It's called leveraging and it works.

Assuming it would work at all, I don't believe it would work fast enough to avoid tons of criticism. Higher taxes and higher deficits in at least the first year would result in a much larger Tea Party.

Maybe the Tea Party made a mistake just by getting elected when they did. If they would have let things sit another 2 years and we got nothing but higher taxes, higher deficits, and still an 8% unemployment rate, that would be the end of the Democratic party for a while.

But now...it's all just theory.

Edited August 3, 2011 by dalegg

[Mr. Big Dog 10,747]

Assuming it would work at all, I don't believe it would work fast enough to avoid tons of criticism. Higher taxes and higher deficits in at least the first year would result in a much larger Tea Party.

Maybe the Tea Party made a mistake just by getting elected when they did. If they would have let things sit another 2 years and we got nothing but higher taxes, higher deficits, and still an 8% unemployment rate, that would be the end of the Democratic party for a while.

But now...it's all just theory.

Higher deficits in the first year? They just put the breaks on the economy with this debt ceiling bill. Best we can hope for is that growth only comes to a standstill - it may well go into reverse. More people will join the unemployment line and fewer people will pay taxes. Deficits will increase following this deal. You cannot close the deficit without growing the economy and bringing down unemployment. But you can't bring the economy back to life and get people back to work with austerity measures. It hasn't been done. Anywhere. Ever. Rather, austerity during weak economic periods has slowed economic growth and increased unemployment. Everywhere. Always.

The problem we're having is that there is the Tea Party - a collection of totally inept idiots holding the gun to America's head thinking they know economics. They. Know. Nothing. They will destroy America unless the silent majority will show them to the door next year.

Edited August 3, 2011 by Mr. Big Dog

[mawilson 2,133]

So, they don't like the debt ceiling being raised?

Government spending is good for Wall Street. Cut spending - stocks tumble.

[Mr. Big Dog 10,747]

Government spending is good for Wall Street. Cut spending - stocks tumble.

Stocks ain't the only things that tumble when you cut government spending while the economic recovery is softening. Employment numbers will tumble and tax revenues along with them. The only thing that isn't going to tumble is the deficit and the debt. Those are going to grow even more now.