Latest hot economic news about Susan Tompor: Dow Drops 500 Points: When Will Wild Ride End? from DetroitFree Press
Is the Dow telling us we're set for a second dip of the Great Recession?
The Dow Jones Industrial Average tumbled by 512.76 points, down 4.31%, to close at 11,383.68 Thursday. Market averages saw the biggest one-day drop in more than a year.
The kind of decline we're seeing is dramatic because it's not often investors watch what's roughly a 10% drop in 10 trading days.
The Dow actually has fallen about 1,340 points, or 10.53%, since July 21, when the Dow closed at 12,724.41. We've lost any gains for all of 2011.
"Right now, it's just panic. It's a freakin' free fall," said Jeffrey Saut, chief investment strategist at Raymond James in St. Petersburg, Fla.
Not all individual investors are bailing, obviously. Some are waiting it out and hoping we're near the bottom.
Everyone is wondering what happens next. The July jobs report rolls out today. Wall Street experts offer varying views as to whether we're near the bottom -- or could see another 5% drop or more from here.
Pam Stone, 52, of Plymouth said she has been watching the stock market this last week or so, like everybody else she knows. She's not selling or making big moves with her 401(k), though.
"The economy has got to turn around sooner or later," said Stone, who is a UAW lead inspector at Chrysler's Warren Stamping Plant. "You've got to have faith in something."
Some Wall Street watchers hold out the hope that over the long term, some of today's troubling issues, such as U.S. fiscal challenges and European debt troubles, will show signs of improvement as we move closer to the 2012 elections. Most say we're not heading into another Wall Street collapse like that of 2008-09, noting that automakers and others are on a stronger footing now.
"Our belief is that this looks more like the 'blow-off' at the end of a decline than the start of a new leg down," said William C. Roney III, senior vice president, division director for the Great Lakes for Raymond James in Birmingham.
"The talk of European contagion and growth fears in the U.S. are masking what has been a pretty good second-quarter earnings season," Roney said. "Equities look cheap based on forward-looking earnings."
Why has the market fallen so significantly?
"It started out with fears of a double-dip because of softening economic numbers," Saut said.
So is another U.S. recession around the corner?
Saut simply answered: "Nope."
Others agree.
"We think we're still in a soft patch, not a double-dip," said Christopher Ruth, chief market strategist for Comerica Asset Management in Birmingham.
"I don't know if we're headed for a double-dip. I would think we're heading for a period of flattish growth," said Bob Bilkie, president of Sigma Investment Counselors in Southfield. Longer term, he is optimistic about stocks.
But experts detect an overall flat feeling about where things are headed, perhaps a hangover from watching the U.S. debt-ceiling talks go down to the wire.
Ruth said some investors doubt that the federal government has much more room to stimulate the economy, given the deficit issues.
"They're kind of boxed into a corner," he said.
David Sowerby, portfolio manager for Loomis, Sayles in Bloomfield Hills, noted that the Institute for Supply Management manufacturing index has fallen so much that it indicates potential for further delay to a more meaningful rebound in jobs.
But Sowerby said the potential for improvement remains, based on stronger corporate profits and improved cash flow.
"Ultimately, that leads to stronger employment growth," Sowerby said.
How long it might take to see that stronger jobs growth, of course, is what has Wall Street -- and the country -- still on edge.
Contact Susan Tompor: 313-222-8876 or stompor@freepress.com
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