Wall Street ended the week with stocks plunging, recovering and then dropping again as investors absorbed another round of bad economic news. The Dow Jones industrials fell close to 340 points. The Commerce Department reported that retail sales dropped by the largest amount on record in October as consumers cut back on spending in the wake of the financial crisis. Retail sales fell by 2.8% last month. Again not unexpected news but enough to dampen any thoughts of an early 09 recovery.
Selling in advance of a Saturday hedge funds deadline contributed to the market’s volatility, and some pullback was expected following the big rally Thursday. Bernanke said during a speech in Germany, that he would work closely with other central bank official to try to alleviate the global financial crisis and left open the door to more interest rate cuts. The general consensus from market analysts is that 2009 will be a particularly bad year for the economy even though the stock markets may see some sustainable rallies toward the middle of 2009 in anticipation of a recovery in 2010.
We caution that we are still in a very difficult market for “Buy and Hold” investors as this has become increasingly a trader’s market. We continue to believe that markets will be range bound from the lows set in October to roughly the 9600 level on the Dow and 1050 on the Standard and Poors 500 with volatility remaining at elevated levels for some time.
