Krugman, again, sees recession ending; stocks run with it

Some stock market bulls are looking to latch onto any bit of good news these days -- even if it’s not really news.

After trading lower for most of today’s session, Wall Street rebounded in the final hour. The Dow Jones industrial average closed with a gain of 1.36 points, to 8,764.49, recouping a 130-point decline. Other major indexes finished with modest losses in light trading overall.

Some traders said the last-hour rally was sparked by comments from Nobel Prize-winning economist Paul Krugman, who said in a London speech that he would "not be surprised if the official end of the U.S. recession ends up being, in retrospect, dated sometime this summer."

Krugman has been mostly downbeat about the economy’s future because he doesn’t believe that the Obama administration has done enough to ensure a strong recovery.

But he already has said that the recession could end this summer. He told an audience in Hong Kong on May 22 that the ending point of the downturn may be dated (after the fact) to August.

Krugman’s concern remains that the recovery just won’t look like much. "Almost surely unemployment will keep rising for a long time and there’s a lot of reason to think that the world economy is going to stay depressed for an extended period," he said today, according to Bloomberg News.

Evidently, though, all the bulls have to hear is "recession over" to shovel more money into stocks.

That’s a good thing for every investor who’s still riding the spring rally. But it’s vexing the folks who are waiting for some kind of significant setback to get aboard.

Since the surge began on March 10, the Standard & Poor’s 500 index hasn’t had a pullback deeper than 5.4% before buyers have jumped back in. "It’s tough to keep this market down," said Todd Leone, head of block trading at Cowen & Co. in New York.

The S&P eased 0.95 of a point, or 0.1%, to 939.14 today. It’s up 39% from its 12-year low reached March 9.

-- Tom Petruno

Photo: Paul Krugman. Credit: Mike Clarke / AFP/Getty Images

Comments

[mr.bilko]

Krugman must not be paying attention to gasoline prices. The tipping point is $3 gallon for regular unleaded. When we cross the $3 mark there will be a huge pullback in consumer spending.

[D Anderson]

I wouldn't be surprised if Krugman got this wrong. The phrase "I would not be surprised" has long been used by economists to suggest a prediction without actually making that prediction. The term means absolutely nothing other than the suggestion that the speaker isn't highly surprisable. Krugman probably would not be surprised if the economy didn't pick up this summer.