STOCKS SLUMP – SIGN OF THE TIMES? – AT 6:35 P.M. ET: One of the supposed bright spots in the economy in the age of Obama has been a healthy stock market. Now even that seems to be in doubt:
The Dow Jones industrial average, one of the most watched metrics of the financial world, dipped below the 10,000 threshold on Monday, delivering a psychological setback as investors sought to overcome fears of a faltering global recovery.
At the close of trading on Monday, the Dow settled at 9,908.39, its lowest close in three months.
Lingering fears over a debt crisis in Europe helped trigger the Dow’s fall. As several countries across the Atlantic grapple with swelling deficits, investors spent Monday trying to gauge how seriously American banks would suffer if European governments could not pay back their debt.
Analysts said the Dow’s drop below 10,000 probably did not mean much for the future of the stock market, but they noted it had a deeper psychological effect for Wall Street.
COMMENT: We should remember that there was a stock market rally between 1933 and 1937, but it had no effect on the real economy. There is, though, as the story points out, a psychological effect. It impacts not only Wall Street, but Main Street, because so many Americans have some connection to the stock market, often through retirement funds.
If the market starts to slump again, it can have a nasty effect on everything else, including employment. We'll watch this.
February 8, 2010