The Dow was down 2.19% today, the Nasdaq 2.75%, and the S&P 500 2.56%.
Obviously, the markets were not buoyed by the debt deal, signed today by Obama, that averted a default.
No, the markets were apparently looking at fresh and fundamentally weak economic data. And investors were probably also looking at that debt deal and seeing two things: 1) the focus on austerity will hurt the economy more than it will help, at least for the foreseeable future, and 2) there was little evidence amidst the debate to indicate that the federal government will do anything else to boost the economy.
On top of that, we kicked the can of serious debt issues down the road.
See the Washington Post: Fiscal analysts see debt-limit deal as missed opportunity to fix real problems. And/or see a post I made here on July 10th: Missing a chance to make progress on deficits and the debt?
A quick summary of some the bad news over the last few days: manufacturing activity weakened, personal consumption expenditures declined, and the latest GDP data was very weak. As Calculated Risk notes, four key measures of recession — real GDP, personal income less transfer payments, industrial production, and total employment — are all still below their peak before the 2007-2009 recession.
Also, keep in mind that the Fed’s second round of quantitative easing (QE2) ended new purchases at the end of June. The Dow has fallen more than 4% since then, while most analysts have revised down their estimates for growth in the 2nd half of 2011.
I am not a stock consultant or advisor, but I’ve already posted some remarks about the disconnect between Wall Street and Main Street. I’m sure the markets will bounce up and down, but I remain very pessimistic about stocks, especially considering the dramatic run up they’ve had over the last couple of years.
Here’s where I’d put the recent good news that might counter the recent bad news, but there isn’t much good news out there. Even if we manage to avert another recession, we have embraced policies that all but guarantee growth so slow that it will feel like a recession to average Americans.