Grizzly, Yogi or no bear at all? We're still waiting to see

Conspiracy theorists can run wild with this one: Just after the Dow Jones industrial average this morning crossed the classic bear-market threshold of a 20% decline from its record high, it rallied.

It wasn’t much of a rally, but it was enough to keep the Dow above the 20%-down mark. The blue-chip index finished the day at 11,346.51, off 106.91 points, or 0.9%. That left it down 19.9% from its record closing high of 14,164.53 reached Oct. 9.

At its intraday low of 11,298 today, the Dow was off 20.2% from its peak.

The mind reels: Does some Wall Street cabal of big market players want to make sure the Dow doesn’t fall into official bear territory and panic the masses?

Wait -- wouldn’t the cabal want to panic the masses, so it could pick up stocks cheap?

Or maybe the cabal wants to keep the market from collapsing just long enough to unload its shares?

Is the Trilateral Commission somehow involved?

Just having a little sick fun here; you have to laugh to keep from crying in this market. To that end, check out this very entertaining picture-post.

As for the market backdrop today: Oil finished at another record high ($140.21 a barrel) and financial stocks again were hammered. That bad combo set the tone for another losing session, although the selling abated sharply compared with Thursday’s rout.

And as has been the case all month, blue-chip stocks were hit hardest today. Smaller stocks continued to fare much better than big stocks. And most market indexes, other than the Dow, still are above their March lows.

The question is whether the general (the Dow) is leading the rest of the troops into a certain massacre.

The Standard & Poor’s 500 fell 4.77 points, or 0.4%, to 1,278.38 today. It’s off 18.3% from its peak reached in October. The New York Stock Exchange composite, down 0.2% today, is off 16.4% from its record high, also set in October.

The Russell 2,000 small-stock index was off fractionally today to 698.14, and is down 18.4% from its record high reached last July.

Note, though, that the Russell was in bear-market territory in March. At its low that month, it was off almost 25% from its peak.

The Russell index’s relative resilience since March may be stoking hopes that if this is a bear market, it’s a kind of mild-tempered, Yogi-style bear -- not the grizzly that ate half the market value of the S&P 500 in 2000-02.

That last bear market, led by technology stocks, was fueled by a collapse of corporate earnings. Just what’s happening to the corporate bottom line this time around will be the market’s main focus in July, as second-quarter profit reports roll out.

How much more fun can investors stand?

Image: The one, the only . . . Yogi Bear. Hanna-Barbera Studios

Comments

[brianoh]

I don't think conspiracy theories are out of the question. We've all heard of the PPT and it certainly exists in one form or another be it the Fed or something else. The Fed allowed overpriced stocks and kept them up in 2001 and again in recent months. Call it conspiracy or call it socialism or call it nationalization of the finance industry, which creates the credit that allows overpriced stocks. Sure the Fed is not strictly governmental, but it is the central bank and fills a governmental role. One thing this is not is a free market. We all know that inflation is a curse that has sunk many civilizations that consume more than they produce. Asset inflation is no less a curse than CPI inflation. It just makes us feel wealthier for a while. The secret to be learnt from the Great D is not to support bubbles, but to prevent them. Helicopter Ben may now realize that. Every action has an equal and opposite reaction (Newton). What we don't know is what that reaction will be. "We'll drop rates and gift $160b, that should fix something" - yeah sure. How about acting like economists instead of Father Xmas. How about fixing the trade deficit, the budget deficit, inflation, unemployment, GDP. How much productivity is involved in an investment bank creating some CDOs out of bad securities and making mega dollars, compared to bringing back some of those jobs sent overseas in the name of globalization and multi-national profits. How can the GDP of a service-based economy with a trade deficit compare to a manufacturing-based economy with a trade surplus? The banking mentality is killing the US economy. Sorry Bill, contrary to what you were told, "the greatest period of wealth creation" was simply "the greatest period of asset inflation". The US consumer is just an irrelevant pawn in all of this.

[Rev. Dave]

The social and economic problems facing this country are wide and deep - and I would argue politically insurmountable.

May God have mercy on us and the next president of this United States.

[Registered Investment Adviser]

Economic readings are actually improving. Why the big fall in June. I think it is the prospect of war between Israel and Iran.