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If the stock market were a movie character, it would be the martini-swilling Broadway star Margo Channing (played by Bette Davis) in "All About Eve" who famously quipped: "Fasten your seat belts, it's going to be a bumpy ride.""Bumpy" might be a gentle way to describe the current volatile market in which the Dow Jones industrial average swoons and falls in triple-digit increments with an alarming regularity. Today's culprit was an expectedly weak report from the Institute for Supply Management's non-manufacturing index, which measures the services economy. Worries that the index indicates a serious economic slowdown sent The Dow Jones Industrial Average down 234.76 points, or 1.86%, to 12,400.40. The NASDAQ Composite Index slumped 39.66, or 1.66%, to 2,343.19 and the S&P 500 dropped 26.25, or 1.9%, to 1,354.57.
According to The Wall Street Journal (subscription required), the non-manufacturing index was 41.9 compared with 54.4 in December, "far lower than the forecast 52.5. Any reading below 50 indicates contraction." Bloomberg News says the index contracted in January at the fastest rate since 2001. The Journal and the New York Times say the services sector contracted for the first time since 2003.
No wonder pundits were left speechless.
"This is a stunning fall," said Michael Moran, chief economist at Daiwa Securities America, told Bloomberg News. "If accurate, it's dire news on the economy."
"[The ISM data] has recession written all over it. It's not that it's weak. It's a complete collapse in the number, one of the lowest readings this statistic has ever had," said Jim Paulsen, chief investment strategist at Wells Capital Management, told The Journal. "And it's not manufacturing, but the much-bigger services sector."
MFR Chief Economist Joshua Shapiro told The Times, "This is an indication for the first time that the bulk of the economy is contracting."
Food for thought on a day when 24 states are going to help chose the next president. The ball now is in the court of Federal Reserve Chairman Ben Bernanke.
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Reader Comments (Page 1 of 1)
2-05-2008 @ 7:08PM
Dan Barnett said...
What's Mr. Bernanke supposed to do? Another rate cut? (the last one had the market up for one whole day)
The constant triple digits up or down make 'bumpy" an understatement. Roller Coaster is more like it.