Stocks have rebounded lately. The Dow is back above 700 and the S&P is closer to 800 than 700. It was just two weeks ago when analysts were discussing the possibility of the market heading below 6,000. A Wall Street Journalarticle discussed the possibility of the Dow sinking below 5,000 or the S&P going below 500 with several analysts saying it was possible.
While Silvant sees the S&P staying in a range of 650 to 750, a decline to 500 is "definitely possible," Mr. Guinther says.
A level of 500 on the S&P is "possible, but I wouldn't put it in the realm of probable," says Thomas Lee, chief U.S. equity strategist at J.P. Morgan. Mr. Lee on March 2 removed a tentative "buy" recommendation he had placed on the S&P in February.
For Mr. Lee, the S&P at 500 "would imply that we are now in a period similar to April 1932 -- the final stages of a bear market."
Between April 8, 1932, and July 8, 1932, stocks fell 34% -- a little more than what it would take to get the S&P to 500.
A level of 500 would take declines for the S&P to 68% since its October 2007 high, compared with the peak-to-trough depression-era slump of almost 90%.
It's certainly possible the stock market could see lows again. We haven't really had any sectors reporting positive growth that would kick the market out of its bearish cycle.
Wall Street Journal Sees Economists Growing Less Optimistic For Quick Recovery
An article in the Wall Street Journal says that economists hopes for a recovery in the second-half of 2009 are fading fast. Some economists now see declining growth through the end of the year.
The average forecast now sees growth in the third quarter at 0.7%, less than half the rate expected last fall. The fourth-quarter picture has also darkened, but just slightly, to growth of 1.9% from the 2.1% seen in November. Five economists see growth declining through the fourth quarter of 2009; they say the current consensus outlook, which says the recession will end in August as GDP growth returns positive, is far too optimistic.
Some of the more pessimistic economists believe the increase savings habits by consumers and the tighter lending habits of bankers are going to prevent a quick recovery.
"The consensus is usually late to the party," said Brian Fabbri, chief economist at BNP Paribas, noting that he was one of the few to forecast the current recession two years ago. Now, he is one of the five who sees GDP declining through the end of 2009, along with Joshua Shapiro, chief U.S. economist at forecasting firm MFR Inc., Paul Ashworth of Capital Economics, Swiss Re chief U.S. economist Kurt Karl and retired Vanderbilt University professor J. Dewey Daane.
"We're in trouble," Mr. Fabbri said. "We don't have sufficient economic plans at present to resolve the banking system or the financial crisis, and the stimulus package seems loaded for 2010." He added that the global nature of the downturn along with U.S. consumers' increased saving and lenders' tightened standards all stand in the way of a quick recovery.
There hasn't been any letup in the pace of the layoffs either so that should mean problems for consumers are going to get worse before they get any better.
Hans Timmer from the World Bank provides some good information about what the World Bank sees on the economic horizon in this clip from the AP. He sees a pretty grim picture for the developing world in 2009 as well as the recession for the developed world. Hans Timmer says there are two big risks. One is that the future is even dimmer than they are forecasting. The second is that the recovery will be delayed so that the recession will be longer than anything since the second World War. He also says the World Bank expects world energy prices to drop another 30% to 40% next year. Hans Timmer says the U.S. recession will continue well into 2009 but that a rebound in 2010 in possible. Reuters and the New York Times have written articles about Hans Timmer's latest thoughts. The thing every analyst keeps saying is that they are not sure how long this recession will last and exactly how deep it will get.
An article in Bloomberg says the U.S. may be headed for its worst recession since World War II. The article quotes a chief economist at Moody's who says "almost all businesses are in survival mode."
Employers cut payrolls last month at the fastest pace in 34 years as the unemployment rate rose to 6.7 percent, the highest level since 1993. The 533,000 drop brought cumulative job losses this year to 1.91 million, the Labor Department said yesterday in Washington.
"Almost all businesses are in survival mode, and they're slashing payrolls and investments just to conserve cash," Mark Zandi, chief economist at Moody's Economy.com in West Chester, Pennsylvania, said in a Bloomberg Television interview yesterday. "We're in store for some big job losses."
The economy lost over 500,000 jobs in November and there seem to be new layoff announcements from big companies almost daily. The latest layoffs come from AT&T, which is slashing 12,000 jobs.
The recession is already been going on for 12 months and is the longest since a slump in the early 80s.
At 12 months, the recession is already the longest since the 16-month slump that ended in November 1982. The recession is the 11th since a downturn that occurred in 1945, the year that World War II ended.
To fight the downturn, Federal Reserve Chairman Ben S. Bernanke this week outlined unorthodox policy action that officials can take beyond lowering interest rates. One option would be to purchase longer-term Treasuries on the open market to inject more cash into the financial system.
Some are ready to use the "D" word which seems premature. Dow Jones quotes former secretary of labor Robert Reich as saying we are trending in that direction.
"Today's employment report begs the question of whether the meltdown we're experiencing should be called a Depression," Robert Reich, former secretary of labor and professor at the University of California at Berkeley, wrote on his blog Friday. "When FDR took office in 1933, one out of four American workers was jobless. We're not there yet, but we're trending in that direction."
Long deep recession or depression it is going to be uncomfortable for many either way. Hopefully, we will not get anywhere near one in four Americans being out of work.
Photo: Breadline in New York City, source: Franklin D. Roosevelt Library
In a statement released Monday, the members of the group's Business Cycle Dating Committee - made up of seven well-known economists, most from the academic sector - said that the economy entered a recession in December 2007.
"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators," the members said in a statement. "A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough."
The committee noted that the contraction in the labor market began in the first month of 2008 and said that the declines in most major indicators, like personal income, manufacturing activity, retail sales, and industrial production, "met the standard for a recession."
You can read the NBER's report here. Every news outlet is coveirng the story today. Below is a video from MSNBC talking about the year-long recession and whether video games are immune. They might be immune for now but if the recession is deep enough it is bound to touch games eventually.
Reuters reports in the video below that the biggest drop in existing home sales in 10 years has reignited concerns about the economy. Stocks were hammered today on news that existing home sales fell 2.6 percent in June. Weekly jobless claims also climbed past the 400,000 mark. The Dow dropped 283 points; the Nasdaq fell 45 points and the S&P 500 lost 29 points.
The BBC reports that former Fed chairman Alan Greenspan - who blasted Bush in his book - has warned "that US economic growth has stalled and a quick recovery is not likely."
"As of right now US economic growth is at zero," he said, adding the longer it stayed this way the greater the risk of a deep recession.
Wall Street giants Goldman Sachs and Merrill Lynch have both forecast that the US economy will contract in 2008.
The US Federal Reserve has said 2008 growth will be between 1.3% and 2%.
The forecast, made last week, was half a percent lower than the Fed's previous estimation.
The gloomy outlook was blamed on falling house prices, reduced bank lending, turmoil in the financial markets and higher oil prices.
If the gloomy outlook isn't enough Greenspan also thinks oil will keep rising and that the housing mark will provide more concern before it gets better.
Mr Greenspan also predicted that booming oil prices, which reached a record of more than $101 last week would keep rising and that the US housing market would see more misery before the tide turned.
Greenspan isn't alone. Just yesterday there were reports that more analysts have jumped on the recession is likely bandwagon. If we do dip into an actual recession how long will we stay there? That's the next question that needs answering.
Many U.S. Citizens Think Recession is Already Here
The dreaded R word is now being used commonly in news stories and polls. A new AP-Ipsos poll has found that 61% of U.S. citizens believe the country is already in a recession. 59% are worried about their stocks and retirement investments. Technically the economy needs to shrink for two consecutive quarters or six straight months (see recession definition) for it to count as a recession but for the people suffering in a struggling economy the technical definition doesn't really matter. Another poll found that most people think a Democrat and not a Republican would best be able to get the nation out of a recession - that might be a sign of the way the election is going to go in November. Even author Stephen King is weighing in. He's slamming the economic pundits who think a recession would help "purge the system."
The GDP grew 2.2% in 2007 and slow 0.6% in the fourth quarter of 2007. Raw Story says economists were expecting 1.2% growth in Q4.
For all of 2007, the economy grew by just 2.2 percent, the weakest performance in five years, when the country was struggling to recover from the 2001 recession. The housing collapse dealt the economy its biggest blow last year. Builders slashed spending on housing projects by 16.9 percent on an annualized basis, the most in 25 years.
"The economy has been subject to something of the perfect storm here. It has been hit by the housing slump the credit squeeze, the subprime slime and stock price declines on Wall Street," said economist Ken Mayland, president of ClearView Economics. "The economy is weathering some pretty stormy seas but it is weak."
The fourth-quarter's performance was much weaker -- half the pace -- than economists were expecting. They were forecasting growth to clock in a 1.2 percent pace.
The 0.6 percent annualized increase in gross domestic product (GDP) marked a big loss of momentum from the third quarter's brisk, 4.9 percent showing. The fourth-quarter pace was the slowest since the first quarter of last year.
IDEAglobal's chief U.S. economist calls it "stall speed" according to MarketWatch.com.
"The GDP hit stall speed," wrote Joseph Brusuelas, chief U.S. economist at IDEAglobal.
GDP hadn't been any slower since the end of 2002, when the economy was struggling to recover from the recession a year earlier.
The 1st quarter 2008 GDP is going to be interested. Will the economy tread along, pick up speed or start to step into a recession?
Sometimes it is worth tacking a look at how we got into this mess in the first place. Reuters has a great recap in the video below. It began with a US housing problem that has quickly mushroomed into a crisis. In this video, Reuters explains how banks begin to tighten credit when a high percentage of subprime mortgages started to become overdue. The loan problem escalated and subprime lender New Century filed bankruptcy. These losses spread to larger banks that have had to write off billions of dollars of debt. Today, the credit problems have not gone away. Home prices are still dropping and inflation is a serious problem. The weakening economy is starting to impact growth and job creation. There are worldwide concerns that the U.S. will fall into a recession and this recessio nwill drag the global economy down with it.
An 
The BBC 
The dreaded R word is now being used commonly in news stories and polls. A new AP-Ipsos poll has found that 61% of U.S. citizens believe the country is already in a recession. 59% are worried about their stocks and retirement investments. Technically the economy needs to shrink for two consecutive quarters or six straight months (see 