A wave of distressing economic news precipitated broad declines on all major US stock indices today. Steven Russolillo, of the Wall Street Journal writes that US Stocks Fall, DJIA Suffers Biggest Drop In Almost One Year.
U.S. stocks suffered their biggest declines since the middle of last year as a slew of downbeat reports prompted fears the economic recovery is running out of steam. The Dow Jones Industrial Average closed down 279.65 points, or 2.2%, to 12290.14, the biggest point drop since June 4, 2010. ...
Concerns about unemployment arose after a reading on private-sector job growth came in well below economists' expectations, fueling anxiety on Wall Street about the government's monthly jobs report Friday.
Pessimism continued to mount after the Institute for Supply Management said the manufacturing sector slowed sharply in May. U.S. auto sales also dropped in May from a month earlier, the auto industry's first significant setback in more than 18 months.
The selling accelerated in the late afternoon after Moody's Investors Service again cut the rating of Greek government debt. steven.russolillo@dowjones.com
The Dow Jones Industrial Average has declined more “than 3% from the highs reached earlier this year.
In a separate article in the LA Times Blog New Stock Market Formula Recession + Losses = Extreme Fear
Even before share prices tumbled Wednesday, Americans were feeling decidedly downbeat about the stock market. ... According to a new survey by Prudential Financial Inc., 58% of people say they’ve lost all faith in stocks, while 44% say they’re unlikely to ever invest more money in the market.
...
Where to turn for help? Apparently, not to financial services companies that sponsor these sorts of surveys. Signaling “a pervasive lack of trust,” 69% of respondents said few financial firms are trustworthy and 62% couldn’t name a single firm they trust.
“Americans’ lack of trust in the financial services industry is a significant issue,” the report said.
Elliot Spitzer, of CNN, invited Robert Reich and David Gergen to comment on his new show In the Arena. Spitzer asked if this broad based slump of stocks, might be signaling that our economy might be stalling out, heading for a double-dipper recession. And wondered if now was the best time to be cutting government expenditures, when we are seeing such bad news in housing, jobs, auto sales, and manufacturing.
Paraphrasing Robert Reich, from memory, he observed 'right now we need to focus on jobs, and economic growth stimulus, not on deficit reduction.' Reich
also noted that, 'one condition we should have put on banks accepting the bailout funds was to force them to agree to renegotiate the debts on underwater mortgages.'
David Gergen, agreed, suggesting 'let’s get out of the ditch first, These numbers are so terrible, there’s going to be a jolt, once they sink in,' he expects politicians will respond.
I believe it was Spitzer who suggested, that rather than focus on the deficit now, we need stimulus measures such as a payroll tax holiday, something on housing, and a major job stimulus program. Then 'start spending cuts several years down the road.'
In our poll tonight, I am wondering how many of you agree with Spitzer, Reich, and Gergen that given these many signals of a sputtering economy, and the risk of a double dipper recession should we be asking Congress to put more attention on stimulating jobs and the economy than focusing only on deficit reductions. And, should we delay any agreed upon cuts so they do not phase in until our economy is improving?