Why Did The Dow Move Up?
There was an interesting article on CNN Money today. It was titled Is the market rally a hoax?.
The basic question the article addressed was why did the stock market go back up? It looked at real estate, the banking sector, utilities, unemployment and large organizations and says that not all that many of them are reporting good news, nor have been reporting good news. Some of them have posted numbers that on the surface look pretty good, but when compared to last year at the same time they’re either still below that number or holding fairly steady. In essence, the article seems to say that the only reason some companies look good is because they’re being compared to previously worse numbers. That, and a lot of speculation from investors that the economy is ready to turn the corner.
I remember back in January I believed that the Dow would never fall below 6,500, and I turned out to be right on that one. However, I never gave any thought to why it would start going back up. Now that I am thinking about it, I guess I figured that, at some point, buyers were going to feel that the market was about as low as it was going to be, and it would be time to snap up some big time bargains. It’s the same thought I had with real estate and all those foreclosures, which has happened, though not to the degree I had thought.
Overall, the economy is still bad. Unemployment is still high, people are still being laid off, and foreclosures are still occurring. Major banks are posting big losses; so are many companies. Yesterday, Home Depot, DuPont and Coca-Cola all posted bad financial quarters. The stock market fell, though it’s still above 10,000 right now.
Is speculating enough to have made the market go this high? Is the article correctly worrying that, if other bad financial news comes in, the market may crash again and head right back towards that 6,500 figure? No one knows; certainly not me. I will go out on a limb and say this, though. I don’t think we’ll see 6,500, or be close to it again. I wouldn’t be surprised if the Dow drops below 8,000 again, however. I think this holiday season is going to show fewer sales than last year, which is going to start another round of department store closings and factory layoffs. I also don’t think we’re going to see another stimulus package, especially if the health care bill gets passed, and indications are that it’s going to go through.
The Dow isn’t going to get much better any time soon; and people are worried about their credit scores.