Stocks jump as Roubini again sees recession's end

Dr. Doom keeps sounding like a man who has rediscovered hope, and that was good enough today to give the stock market another lift.

From Bloomberg News:

The U.S. economy may pull out of a recession by the end of the year and a second stimulus package would help broaden the recovery, said Nouriel Roubini, the New York University professor who predicted the financial crisis.

"The free fall of the economy has stopped," Roubini said at a Chilean investors’ conference in New York. "The economy is still contracting but slowly."

The comments by Roubini, who picked up the Dr. Doom moniker in recent years for his extremely bearish (and accurate) calls on the economy and markets, didn’t appear much different from those he made a week ago. He told Bloomberg on July 9 that the recession would last another six months.

But stock prices began to pull higher today as soon as his latest comments hit the wires at about 10:30 a.m. PDT. The Dow Jones industrial average closed up 95.61 points, or 1.1%, to 8,711.82, the fourth straight advance.

The Dow, up 6.9% this week amid some relatively upbeat corporate forecasts from Intel Corp., American Express Co. and others, now is just 1% below its spring closing high of 8,799 reached June 12.

Broader market indexes today got even closer to their spring peaks. The Standard & Poor’s 500 rose 8.06 points, or 0.9%, to 940.74, leaving it 0.6% below its June 12 closing high of 946.21.

More from Roubini, via Bloomberg:

To help shore up growth, a second [government] spending package may be needed by late 2009 or early 2010 totaling between $200 billion and $250 billion, Roubini said.

"We should continue with fiscal stimulus and we might need a second one," Roubini said. While the worst of the crisis is over, there’s still a "meaningful amount of weakness" in labor markets, industrial production and housing, he said.

Without more stimulus, Roubini expects a "shallow, below-par" recovery that could end up in a "double-dip" recession near the end of 2010.

-- Tom Petruno

Photo: Nouriel Roubini. Credit: Daniel Barry / Bloomberg News

Comments

[David]

My take on Roubini's statements is that he sees a slight easing of the recession coming near the end of this year before it dips downward again. A 'dead cat bounce' from bailout induced liquidity and new spending programs. The economy is still in very bad shape and will continue to be for at least one and a half years before we see the start of a tangible but sluggish recovery. Hardly an encouraging analysis. Roubini may be known as Dr Doom partially because he tells it like he sees it. It would be uncharacteristic of him to spin his opinions to bolster confidence in the markets.

[martscan]

According to CNBC at 5:51 PM EDT, Roubini stated after today's market close that his remarks were taken "out of context", and his current position is as it has been previously stated. He sees no economic growth beginning in 2009.

[Tom Petruno]

@martscan: As my post notes, he was just reiterating what he said last week. The market just ran with it anyway. He did put out a statement later because some news orgs. apparently wrote that he had changed his forecast and had become more optimistic. He has been saying for some time that he expected the recession to end at the end of the year, with a feeble recovery in 2010.

Tom Petruno

[martscan]

Thanks Tom, in this deal, I'm just a messenger. But I'm going to take a shot at the short side on the opening. If Dr. Doom's rather insipid remarks can cause a 100 point rally, let's see what an apparent denial can fashion.

[martscan]

On second thought, I think most traders are as tired of Roubini as I am. Earnings are driving this rally. I'm going to stand aside.

[Nikkei 225]

What happened to this countries independent thinkers, people who could make their own decisions based on facts and market knowledge. Have we all turned into sheep, blindly answering the call of our also clueless financial oracles. It frightens me that the comments of one man can make the Dow gain nearly a 100 points. Blindly trusting the so called experts is how we got into this mess in the first place, we never learn.

[SMRR]

He's just tired of people treating him like a party pooper. Nouriell knows this thing lasts through 2016. Or maybe he's just sick of the coverage, so he decides to jump on the bandwagon with the other idiots. Next thing, he'll be saying is V-shaped recession.