Financial Market Update-Mon., Oct. 20

As of early afternoon Eastern Time, the Dow Jones Industrial Average was up 2.4 percent, and likewise the Nasdaq and Standard & Poor’s 500 gained ground. But these days, “it ain’t over till it’s over” has never been more apt in tracking the daily rises and falls of the market. Does this count as a…

As of early afternoon Eastern Time, the Dow Jones Industrial Average was up 2.4 percent, and likewise the Nasdaq and Standard & Poor’s 500 gained ground. But these days, “it ain’t over till it’s over” has never been more apt in tracking the daily rises and falls of the market. Does this count as a dead-cat bounce of some kind? The Conference Board is reporting that leading economic indicators rose 0.3 percent in September, after dropping 0.9 percent in August. The leading index is a reflection of 10 separate indicators, six of which rose, such as real money supply, consumer expectations and interest rate spread. Falling components of the index–no surprise here–included building permits and jobless claims. Most economists are predicting continued declines in the index come October. In fact, most economists are now predicting at least a few quarters of recession, but some are optimistic enough to predict recovery after that. After all, as President Hoover said in November 1929, “Any lack of confidence in the economic future or the basic strength of business in the United States is foolish.” Sure enough, things were much better 15 years later.Is Fed chairman Ben Bernanke like that doctor from bad TV fiction, pounding on the chest of patient (the U.S. economy), crying “Live, dammit, live!” In any case, the good doctor recommends more stimulus for the economy, as he suggested this morning. Access to credit is the problem, as everyone from Bernanke on down has noted. For more about Ben’s speech and its Fed chairman-isms, see Scott Baltic’s daily bailout article today in CPN.The upside of a credit squeeze is that fewer applications for new credit cards are being mailed to consumers, encouraging them to borrow, borrow, borrow. The downside, unfortunately, is still fairly alarming. GM, for instance, is having trouble finding the dosh to buy Chrysler. Then again, it might not be so much a credit shortage as lenders thinking it would be a bad merger. “Observers may blame the credit crisis and the present reluctance of banks to lend,” wrote Peter Morici, professor at the Robert H. Smith School of Business, this morning. “While that makes GM’s task more difficult, it certainly is not the central reason why the acquisition should not go forward. Simply, Chrysler has two good franchises that would compliment GM’s product mix but those are hostage to an otherwise uncompetitive corporate structure. GM can’t fix those problems easily.”

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