FED Chairman Bernanke said risks of an economic downturn are more pronounced after a Philadelphia Fed Reserve survey showed regional manufacturing activity weakened in January. He predicted the housing sector will be a drag on the economy for much of 2008. These comments sent stocks lower. Dow is down 155, decliners over advancers more than 3-1 while NAZ slipped 26. For technical people, it's flirting with the lows of 12K last March. I have a feeling they will take them out (go even lower).
There is a lot of talk about an economic stimulus package (i.e. more gov spending to boost the economy), but so far it's just talk. Chances are in an election year congress will be eager to vote on spending more money, but results from gov spending are not easy to predict. Results from the last cut are still debated.
Financials are weak, what's new? Merrill Lynch (MER) is down 4.39 after reporting $10B quarterly loss, after taking $15B writedown on loans. Again, what's new? They, along with other financials, are taking a "big bath" hoping that huge write offs will put them in better shape to report good earnings this year, not to mention nice bonuses.
Not to be forgotten, home construction fell 25% last year, the largest drop in 27 years. The economy has plenty of problems. These will take time to fix.
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