As the stock market zigs and zags in dramatic fashion every day, investors are waiting for a sign of when they can see a bottom, while most experts think the economy is already in the grips of a recession.
“Last week’s economic releases pointed to recessionary conditions,” Banc of America economists said in a research note. “The housing collapse continues and by some dimensions accelerated anew in September.”
Market watchers have been predicting the bottom for stock for months now, so it’s proven a tougher task than many had thought -- especially since the credit markets have been frozen for so long, with banks hesitant to lend to each other after Lehman Brothers filed for bankruptcy and left many other financial institutions on the hook for losses.
“The economic damage from the current crisis will be significant,” James Glassman, JPMorgan Chase economist, said in a research note Saturday. “Forces that are cyclical and structural and domestic and global are ushering in a period of disinflation… Markets ‘know’ this.”
Indeed, some people are saying that the Dow, which closed on Friday at 8852.22 (and at its height was over 14100), could go down to 7500 -- and a few think even lower, maybe 4000 -- before it hits its true bottom. People have been trying to call the bottom for months now, but as new revelations come out about credit-market woes, the indexes have headed inexorably lower.
Third-quarter earnings results from U.S. companies, which come out in force this next week, could provide a glimpse into what the future holds for American firms.
In particular, a number of components of the Dow Jones Industrial Average -- the 30-stock index meant as a representation of the entire U.S. economy -- will reveal their profit reports. Those include American Express (AXP) on Monday; 3M (MMM), Caterpillar (CAT) and DuPont (DD) on Tuesday; AT&T (T), Boeing (BA), Mcdonald’s (MCD) and Merck & Co. (MRK) on Wednesday; and Microsoft (MSFT) on Thursday.
Also, there are a number of financial firms, which are at the heart of the current crisis, that could offer indications of how things are going.
Investors will be able to dissect profit reports from UnionBanCal (UB) and credit-reporting agency Eqifax (EFX) on Monday; Fifth Third (FITB), KeyCorp (KEY), M&T Bank (MTB) and USBancorp (USB) on Tuesday; Wells Fargo (WFC) takeover target Wachovia (WB) and JPMorgan (JPM) takeover target Washington Mutual (WM) on Wednesday; and TD Ameritrade (AMTD) on Thursday.
Other notable companies reporting earnings include tech names Texas Instruments (TXN), Apple (AAPL), Yahoo (YHOO) and Baidu.com (BIDU). Then, there’s oil company ConocoPhillips (COP), and auto makers Daimler (DAI) and Ford Motor (F).
And, there were several pieces of economic news due out that could influence events.
Stock futures were slightly higher on Sunday evening, as traders sought to find some good news in the government programs being enacted around the world that are intended to help the private sector reinvigorate itself.
Of course, market trading in Asia and Europe on Sunday night and Monday morning will set the tone for the U.S., even if it doesn’t always determine what happens here. Those indexes were generally slightly higher also.
Still, many investors are hopeful that amid the volatility -- which is typical of a bear market -- stocks are carving out a bottom, and will be heading higher soon.
But as the past predictions have shown, it isn’t as easy to call the bottom as it may seem.
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