The winds of change the that we have been warning about just keep on blowing. Since then the S&P 500 is down about 5.75% after falling from a high of 1150.
Earnings, meanwhile, have actually been pretty good across the board.
Even still, the downtrend has continued as the next big question for the markets seems to be "That's great... but now what?"
That sentiment was only further underscored this morning when the GDP number failed to give the markets a much needed boost.
Following a decent number, the markets have basically yawned again—as in "What's next?"
That's the new $64,000 question the bulls can't seem to answer— even though the economy did grow faster than expected at the end of last year.
In fact, the 5.7 percent annual growth rate in the fourth quarter was the fastest pace since 2003 offering the strongest evidence yet that the worst recession since the 1930s ended last year.
However, even after two straight quarters of growth there is still plenty to worry about since the expansion in the fourth quarter was fueled primarily by companies refilling depleted stockpiles, a trend that will eventually fade.
And while the report did provide an upbeat end to a dismal year, the larger truth is that the U.S. economy declined by 2.4 percent in 2009. That's the first annual decline since 1991 and the largest drop since 1946.
What we are left with then is an economy that most analysts think will only grow by 2.5 percent this year. Better yes.... but no where near enough to put a dent in the unemployment number which seems like it will be stuck in 9-10% range for some time to come.
What's needed, of course, is for consumers to ride to the rescue since 70% of our GDP comes from consumer spending.
The problem is wages and benefits paid to U.S. workers ended the year with the smallest rise on records going back more than a quarter-century. What's more, the Middle Class has been practically squeezed into oblivion by the rising cost of everything on their list of must-haves.
As for raises, they can practically forget it since the loss 7.2 million jobs over the past two years has put a lid on wages. Meanwhile, a separate report from the Labor Department released earlier this month showed that nonsupervisory workers' inflation-adjusted weekly earnings fell by 1.6 percent last year, the sharpest drop since 1990.
The result is an incredible amount of economic slack since you can't get blood from a stone. On top of that, consumers just aren't as willing to bury themselves in debt anymore.
Instead they are actually saving money for a change.
That's the "new normal" the markets are struggling to come to grips with.
In the meantime, the S&P 500 is teetering on support...
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Disclosure: no positions