For the narrative about today’s market, I’ll turn to the lede of the Wall Street Journal: “U.S. stocks fell sharply, dragging the Dow Jones Industrial Average below the psychologically important 12,000 mark, as disappointing news about claims for unemployment benefits compounded Wall Street’s worries about trade in China and European sovereign debt.” As regular readers recall, I am of a mind that nobody really knows what propels the stock market most days, it being a product of millions of individual decisions based on varying degrees of information by the traders. Still, there’s plenty to worry over.
Even if oil prices weren’t threatening a fragile recovery, and even if Wall Street cared about persistent joblesness (unlikely, as long a profits stay high and deals propel prices), the rally has been hitting a wall lately. Many stocks are already overpriced. Inflation worries make it unlikely that the Fed will do a QE3, adding more hot money into the casino.
The biggest jump in the trade deficit in six months is partly driven by fresh demand here for imports and oil prices, but it’s also a sign that America can’t find a way to address persistent imbalances or improve its export footprint. Does Wall Street care? Not if a hot new job-killing acquisition comes along (AOL just cut 900 jobs to enrich the playerz). Wall Street should care, but the deal boyz and financial playerz are citizens of the world, don’tchaknow.
And there’s a world of trouble, not least Libya and the Middle East, which may not turn into free-market Jeffersonian democracies eager to sell us cheap oil. Moody’s downgraded Spain’s credit rating, raising fresh fears about the Eurozone. It’s also interesting that China posted a trade deficit for February, its largest in seven years. You read that right. Maybe exports suffered from the Lunar New Year holiday. Maybe something larger is at work.
Today’s Econ Haiku:
Gary Locke’s new job
Will it help the rest of us
Find employment, too?