For a moment, all eyes left Wall Street and focused instead on the election. At first, it looked like the market liked what was happening, as the Dow soared on Tuesday in anticipation of the election cycle finally being over. But the excitement was short-lived, at least as far as the markets are concerned.
After climbing over 300 points on election day, Wednesday and Thursday were a dramatic reversal, with each day registering losses of 486 points and 443 points respectively. So what happened? Why the huge decline after all the celebration surrounding the election?
Since the election is over (finally!), the focus shifted back to the economy. And the economy is in bad shape, and looks to be getting worse. Nonfarm productivity growth fell to 1.1% from 3.6% in three months. New claims for unemployment benefits rose. 3.8 million people are currently drawing unemployment benefits, the most in 25 years. Hours worked declined, an indicator that layoffs may be pending. Even so, labor costs were higher than expected. Unemployment numbers released Friday gave even more evidence that things are slowing down. The ISM (Institute for Supply Management) index is an indicator of service sector activity. The index declined to 44.4, below expectations that it would come in at 47. Anything below 50 is seen as indication that the economy is contracting.
The market did rebound 2.85% today (Friday), ending the week down 382 points. As we've said before, we believe that the market angst is going to be with us for a while. However, it is likely to be a bit manic depressive, with its moods swings dependent on what data has hit the market most recently (and more importantly, how the data was interpreted).
If you have any questions or comments, please e-mail me at nsnodgrass@evanstonadvisors.com
