Wall Street’s roller-coaster ride saw more gut-wrenching turns over the past week as investors came to terms with what appears to be a deep and painful economic slump.
The market faced an official declaration that the US economy is in recession — and has been for a year — and indications that conditions may be worsening.
In the week to Friday, the Dow Jones Industrial Average fell 2.19 percent to 8.635.42, following a stunning 9.73 percent rise in the prior week.
The tech-studded NASDAQ shed 1.71 percent to 1,509.31 and the broad-market Standard & Poor’s 500 declined 2.25 percent to 876.07.
The market action was highly volatile as signs of deeper economic troubles resurfaced. One official report showed the US economy shed 533,000 jobs last month and more than 1 million in the past three months, pushing the unemployment rate to a 15-year high.
“Just when you thought that the US economic outlook couldn’t get any uglier, it goes ahead and does,” said Meny Grauman, economist at CIBC World Markets. “The running tally of payroll declines that the US economy is now racking up is pushing up the odds that this downturn is even deeper than many had contemplated.”
“The economy is now locked in a vicious downward spiral in which employment, incomes, and spending are collapsing together,” said economist Nigel Gault at IHS Global Insight, predicting a drop in fourth-quarter activity of between 5 percent and 6 percent annualized.
Other surveys showed extremely weak readings on the factory and service sectors, and reports from retailers showed consumers still clinging tightly to their wallets.
Brad Sorensen, analyst at Charles Schwab & Co, said the grim economic situation does not preclude a stock market rebound.
“We want to remind investors that the labor report is what we call a lagging indicator — meaning it is always behind the actual economic situation,” Sorensen said in a note to clients.
“We expect the bad economic data to continue for the foreseeable future, but note that the market typically starts to recover five to six months before the economy does,” he said.
Tuesday, the National Bureau of Economic Research, the panel recognized as the official arbiter of business cycles, said the US recession began in December last year, ending any doubt about the slump.
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