05/12/01
On Friday, the Dow slid aggressively – down 89 – to close at 10,821, down 129 for the week. That makes four of the past five sessions ending badly. The Nasdaq shed 21 to 2107 ending the week down 3.8%. The S&P 500 dropped 9 to 1245, a loss of 21 for the week.
Is the bear market rally over? Will the next phase of the sell-off be as devastating as the first? We will certainly see…
Reuters released a poll Friday, showing “all but one of the 25 primary dealers of U.S. government securities – firms that trade directly with the Fed in money markets – that the central bank on Tuesday will cut the fed funds rate to 4.0% from 4.5%.” (USAToday)
The poll, taken just after April retail sales data and a survey of consumer sentiment for May were released – both were both better than markets had expected. But unemployment has risen to 4.5% and most dealers are expecting that number to invite the Fed to slash rates again…at the Daily Reckoning we wonder – will it help?
Code Blue: Greenspan, caught between the Charybdis of inflation and the Scylla of recession, is fast running out of options. A post-bubble correction is likely to be long… and painful.
The real story for New Era dreamers reared its ugly head early in the week. The Labor department said Tuesday that ‘productivity’ dropped in the first quarter 2001… the first such decline in 6 years.
The ‘productivity miracle’ – Greenspan’s long-time partner in crime – has fizzled, proving to be nothing more than a statistical mirage. In this bright new age… how could Greenspan have gotten it so wrong?
ADD’L PRICES FOR THE WEEK:
Gold: $268
Crude Oil: $28.55
Natural Gas: $4.27
CRB Index: 213
Dollar Index: 116
The Sad, Sad Euro: $.87 down 2 cents on ECB rate cuts
British Pound: $1.41
Japanese Yen: $.81
Addison Wiggin
Paris, France
May 12-13, 2001
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