Last week the thought was, maybe better say the hope was, that the stock market had some upside after it held above the lows of 1045 set by the Standard & Poor’s 500 stock index intraday on February 5.
I don’t think that anybody was looking for an extended rally but after the S&P held at 1072 on May 21 and then at 1067 on May 26 and then again at 1071 on June 1 the consensus was definitely looking for more than a bounce. Lots of technical analysts were calling stocks oversold and looking for a rally that took the index back to its April 19 high of 1217 or so.
That wouldn’t have been a big enough move to guarantee a continued rally but 150 points is 150 points, especially when it amounts to a gain of 13%.
And then came June 4 when the index fell 3.4% to 1065 on news that private employers hired just 41,000 workers in May and that all hiring, government and private, added up to just 431,000 jobs, a far cry from the 500,000 that economists were expecting.
So now investors go back to watching not the top of the market’s potential range at 1220, but the bottom to see if 1045, the February low, will hold.
If it does, then the month long move downward from the April high near 1220 is still just a correction. A full blown 12% correction but just a correction none the less.
If it doesn’t, then the odds are that we’re looking for another leg downward—maybe as little as 5% below 1045, maybe as much as 10%. But something worse than investors have experienced so far.
Let me say that the overnight market action from Asia isn’t especially encouraging as of 11 p.m. ET Sunday night. The MSCI Asia Pacific Index was down 3.2% at 11:13 a.m. in Tokyo and futures on the Standard & Poor’s 500 were down 1.3%. The euro was also lower, down 0.7% against the dollar.
There’s nothing much on the U.S. economic calendar likely to move the stock market until the release of the weekly figure on initial claims for unemployment on Thursday, June 10.
The big uncertainty remains the international news flow with the pessimist in me believing that we’ll see some more bad news from Europe.
Maybe not though.
Over the weekend the Hungarian government, which had warned of default on Friday, said, in essence, “Never mind. Things aren’t nearly as bad as we told you a day ago.”
To say that nobody believes any number coming out of Hungary now and isn’t likely to for a long, long time is an understatement.
southof8,
As a Georgian, I can tell you: I drive a car. I use gas. So I have benefitted from the offshore drilling. If the oil washes up on the Georgia shoreline, I have no excuses.
Great analogy. States’ rights is a sticky issue. It generally comes up when a few state governments are doing something most citizens of other states find unpalatable, if not downright immoral, and which generally isn’t confined to within that state’s borders.
The BP spill is a good example (and a sad example of race to the bottom). Texas and Lousiana have chosen offshore drilling and extensive exploitation of their state’s natural resources, at the potential risk to the environment or other industries like fishing, tourism, etc. (The shrimpers/fishermen had to know there was a risk of killing off their fisheries.) Their coast, their choice. State’s rights.
Until their choice starts washing up on the Georgia shoreline, killing its tourism, and Georgians weren’t all that up for the drilling in the first place- they got no jobs out of it, no dividends (hello Alaska), no economic activity. Just miles of tar on their beaches and a couple million dead fish. Does Lousiana get to tell Georgia, too bad, you should have chosen to drill baby drill, since you’re paying the price anyways?
Full disclosure- Though I live in southern california, I come from seven generations of Texans- GO LONGHORNS!! And I was commercially fishing Bristol Bay in 1991 and 1992 and saw how long the after-effects of the Exxon Valdez spill lasted (spill was in 89 but deeply impacted the 1992 harvest). The price of large-scale oil spills is high and lasting.
I think you make a reasonable argument there, although I wouldn’t blanket all taxes and spending to the Feds (i.e. education), or compare US state structure to the EU structure.
For a small govt./state rights advocate, I would actually like to see the Feds take on the Deleware we-won-the-race-to-the-bottom corporate law. That has possibly created more economic problems in America than anything else by aiding and abetting ransacking CEO’s and boards. I think some interstate commerce clause usage would help here.
Ed, I’m not even partially wrong ;).
The problem with leaving it to states to tax rather than the Feds is you wind up with a Greece-Germany problem, when California decides to let Texas to absorb the costs of Hurricane pick one, or when Georgia decides New York can pay for WTC rebuilding on its own, etc. Yes, I see the argument in favor of decentralized power and a starving government is a more efficient government. But on balance I don’t think greater efficiency results from sending tax dollars to Carson City or Montgomery rather than D.C. USA has more flexible labor markets and more efficient allocation of capital because we are a Republic, not a Confederacy. That efficiency is undermined by taxation at the state level but not the federal level.
But I’m the first to admit I might be wrong.
Sigli, I think the difference is if we had to pay rather than have our children pay, we might decide to live without it- regardless of what it is.
yx,
southof8 is not entirely wrong. He/she has a point about paying for what you use, instead of passing it along to your children.
sigli/southof8,
Good debate folks!
I just want to know how much you believe is enough taking, democratic confiscation, soft slavery, legislated theft of property, mobocracy.
I think we all understand very well that we should pay for what we buy. The logical question that follows is what amount of taking is enough, or, what is too much?
And there’s no magical difference between forcing someone to pay for a pet project vs. passing it on to children. Either way you’re forcing it upon someone else–which generation is irrelevant.
Ed:
You and I sometimes make same mistake, arguing with a piece of rock.
southof8,
Simple question for you: Aside from the army, who needs to fund all those things? The federal or state governments?
Just speaking for myself, I am not questioning the need for states to fund things like you mentioned. But I do question the need for the federal government to fund those things also. For example, why do I need to send money to Washington to pay for my local police? Couldn’t I just send tax money to my local tax authority?
Then move to fantasy land. But as long as you drive on government funded roads, send your children to government funded schools, use government funded electricity and phone lines, expect to be protected by government funded cops and armies, enjoy the benefits of government funded research into all manner of things that improve your health and well being, and otherwise benefit from government spending, you should expect government to take what it needs from you, not your children.
Is that a joke? You use the word TAKING so well. Maybe you don’t put much stock in freedom, but for those of us who don’t believe in soft slavery, a government that spends too much suggests a government that spends too much.
Maybe you can tell us all what you amount of taking you believe is “enough”? Sixty percent? Seventy? Ninety?
I vote not to work six months every year for what others want. I don’t believe in physically enslaving others to reap the benefits of their labor, and I don’t believe in enslaving others through a vote. There’s no difference when it comes to forcing one to pay for the luxuries of another. So please tell us what is enough since you believe the govt. currently doesn’t TAKE enough.
As a teacher used to say: Let’s try to take profit for our debts.
Sigli, the size of the national debt suggests the government hasn’t been and still isn’t taking enough.
South, the reason for the response is the govt. takes enough already. 15.3% SS + med., 10-12% Fed. income on middle class, 5+% state, and you’re already around 1/3 of income confiscated. Add in property tax, sales tax, gas tax, specialty consumption taxes, and all the corporate taxes that the consumer ultimately pays, and the idea quickly becomes “JUST HOW MUCH ARE THEY GOING TO TAKE?”.
Most of the vitriolic right would actually love a consumption tax IF they could trust the govt. to not raise the income tax back up a couple years later. Govt. doesn’t have a good track record of not raising taxes on the middle class (well, alcohol and tobacco taxes have gone down over time, till now).
southof8,
Believe me, I’d happily give up the war in Afghanistan for Social Security and Medicare cuts. I’d give up American military bases overseas for welfare cuts/eliminations. I’d give up the Department of Homeland Security if we could also get rid of the Department of Education. And I think we’d all give up Fannie and Freddie.
I can go on, but I think you get my point. I am more than happy to toss out a whole bunch of things we don’t need. So if you think I am just blindly saying we need to cut spending, think again.
I don’t understand why proposing a consumption tax generates such vitriolic response.
In a capitalist economy, it seems to me the two things valued the most are human labor (i.e., work) and capital investment. So what two things do we most heavily tax? Work and capital investment.
Seems kind of nutty.
Ahh, a consumption tax. If only we could trust big brother to not tinker with it. I’d go with a higher gas tax myself (of course offset w/ 1. do no harm provisions for fixed incomies, 2. complete alt. energy subsidy removal, 3. payroll tax offset). It would be tax revenue neutral but spending/subsidy negative (positive for deficit), would most likely save Americans money as oil prices started tanking in result, and would be protectionism the whole world wouldn’t mind. China, etc. would easily pick up the slack.
It’d be nice if politicians could actually make and talk about such things without the ideological screaming from both sides.