Thursday Market Roundup: Concern About Economic Growth Slowdown

The market is under pressure again this morning over concerns about how much economic growth is slowing. Asian markets were hit by heavy profit taking, with most bourses down more than 5%.

Acknowledging the slowing growth, the Bank of England slashed its benchmark lending rate 150 basis points from 4.5% to 3.0%, a huge move and one that speaks to the fact the concerns about future growth should be trumping inflationary concerns at the moment. The ECB also cut rates, from 3.75% to 3.25%, and will likely have more cuts in the future.

The rate cuts in Europe are pressuring the Euro vs. the dollar, which is also weighing on commodity prices. Oil prices are down sharply. After briefly popping back above the $70 level earlier this week, crude oil prices are down more than $3 today back near $61.50.

Retailers reported October sales today, which were mostly weak (more on that later). But although the reports were weak, some of the stocks Nordstrom (JWN), Target (TGT), etc are actually bouncing. And Wal-Mart (WMT) bucked the trend, poasting same-store sales growth of +2.4% last month. Seems that consumers are bargain hunting.

Tech stocks are lower today after Cisco (CSCO) lowered its guidance, saying that worldwide growth was slowing dramatically and forecasting future order growth right now is very difficult. The CEO also said that he expects the U.S. to be the first to rebound from the economic slump, followed by the likes of India and China.

The put/call ratio is spiking to 1.45 right now, and the volatility index [VIX] is up 9% today to 59.75.

Disclosure: long VIX puts.

Comments

[MarvinMBA:]

I've switched my view from Recession to Depression for a 5 to 10 year period until the country develops a new model for suvival and it will probably be social/communistic in nature. Bush and the Republican Administration already gave us a headstart with essentially nationalizing the Banking/Brokerage/Real Estate industry and we will do the same for our Insurance and Automobile Industry....MarvinMBA

2008 Nov 06 01:20 PM

[jack kreg:]

I just realized today that taking interest rates to near zero about the globe has and will not put a bottom in the economic downturn, much less lead to recovery.

What will is something new for the global economy, tax cuts for all workers and employers. Reagan/Thatchers genius of the 80's worked for them, they learned from JFK who also used tax cuts to spring the economy back to life.

Coordinated tax cuts in all global economy's; UK, USA, EU and Asia!

2008 Nov 06 04:39 PM

[BlueOkie:]

Instead of a $100B stimulus, how about giving jobs in the form of the 2008 version of WPA and CCC. New Deal again.

2008 Nov 07 08:48 AM