The largest drop since May 6 had the S&P500 fall -3.37 percent; but the NASDAQ plummet even more, closing off -3.96 percent, and suffered its worst day since May 20. Similarly, the DJIAs loss, its largest since May 20, set this index back – 2.88 percent. The pattern of the past few days stands at four successive declines for the DJIA and two losses in a row for the NASDAQ and the S&P500.
Since 1950, 14 other days encountered this pattern, 4 of which occurred since January 2000. However, none of these closes approached the size of todays losses. Focusing on when these last 4 occurred with respect to the price trend at that time, there seems no relationship: 2 shared rising prices and 1 happened just before values hit bottom in January 2009. Yet considering only the price action of the following day, in the past increases outnumbered declines.
Lets discuss these results in context of yesterdays, June 28, post. Of course that focused on the future, and concluded that recent patterns implied rising prices. Yet todays deep losses contradict that projection. It would be surprising if readers do not feel let down by this sequence. And attempting to justify this contrast by claiming that the forecast is for the long term, while todays changes in values refers to the everyday ups and downs of the market, will fail to put to rest the notion of frustration.
Nevertheless, the outlook for the long term, for the direction of prices over the next few months, is uncertain. This indecisiveness results from the continuing turmoil in the worlds financial markets, from the
Canadas summit making budget surpluses or even balances now the center of attention. The current unemployment situation and its lack of sufficient decline which means output that could have been produced, will never be reclaimed -holds everyones attention
.With most of todays decision makers forgetting the basic result of introductory economics courses, that budget surpluses increase unemployment, while deficits generate demand and earnings, it is easy to explain the concerns and doubts about our economy and our future.For state legislators to prefer cutting the appropriation for education, thus reducing the knowledge base of the next generations workers, rather than live with temporary shortfalls, is contrary to common sense. Time will pass and our children will be short changed, future productivity will decline, just so that expenditures will not exceed the smaller revenues caused by the decline in output and income.
Surely such contrariness is alarming; so it should not be surprising that markets respond to such turmoil with drastic revaluations.
DJIA -2.88 percent NASDAQ -3.96 percent
S&P500 -3.37 percent
This entry was posted on Tuesday, June 29th, 2010 at 12 072010000000Tue, 29 Jun 2010 19:04:32 +0000 and is filed under Market Report. You can follow any responses to this entry through the RSS 2.0 feed.
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