Worries on Wall Street Continue
by admin ~ October 25, 2008
By Susan Duey
A wild ride on Wall Street pushed stocks lower during morning trading and finished trading with 100 point gain. Fears about economy were clearly seen as investors were in despair stage today.
Investors are ignoring good news and only focus on bad news. With concerns that economy is in recession or headed for one let investors hunt for bargains and quickly sell them off. Markets are currently oversold and should recover quickly and significantly, but until that happens markets will remain volatile as investors try to test whether the market has formed a bottom.
Many of the market short rallies have been buried right away by investors who are scarred that stocks may decline even further. The opportunity to cash out is prompting investors to sell.
Most companies who posted strong earnings had their shares enjoy mild rallies. A company like McDonald’s which beat analysts estimate had to watch its stock decline as their forecast predicts lower sales.
Fear buying is persisting on Wall Street, as bad earnings hammered stock performance and good news had little or no impact.
Goldman Sachs Group Inc. is preparing to cut 10 percent of its workforce, while Amazon.com Inc. lowered its revenue guidance for the year amid a weakening economy. Eli Lilly and Co. said it recorded a loss for the third quarter.
Investors are not willing to buy up stocks until they see improvement in the market. The mild volatility seen on Wall Street is result of liquidation at the end of the day or next day. Hedge Funds need to recover their profits before they fall even further and huge sell off sets in.
Taking out financial stocks, there are companies meeting or exceeding expectations but fear set in and investors sell.
The Labor Department reported Thursday that new applications for unemployment benefits rose 15,000 last week to a seasonally adjusted 478,000. Jobless claims above 400,000 are considered a sign of recession.
Good news also came form FDIC as U.S banking regulators are working to create a loan guarantee program that would help modify home loans.
Sheila Bair said in remarks to be delivered before the Senate Banking Committee that “Specifically, the government could establish standards for loan modifications and provide guarantees for loans meeting those standards,” She further explains “By doing so, unaffordable loans could be converted into loans that are sustainable over the long term.”
The $700 billion financial plan passed earlier this month gives U.S. Treasury the power to use loan guarantees to facilitate loan modifications.
The effects that started to collapse 15 months are now seen in businesses as job cuts are necessary to keep businesses in profits. Chrysler said it was closing one plant and eliminating shift in another plant resulting in 1,825 job cuts. Chrysler also said it was planning to make involuntary cuts in its salaried and contract workforce. While GM reported that will no longer contribute to 401K plans.
Is good news coming? Amid FDIC and their new plan may prevent more foreclosure and most savvy housing bargain hunters are slowly coming to hunt for those lowered priced jewels, market may be turning back.