The last 5 days of the stock market closings have been trending down and becoming worrisome. The major contributor of the stock market losses come from Banking industry taking a huge hit due to bad loans which is also contributing to the largest inventory of foreclosures in recent history. Below are the three major US indexes that I like to follow.
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THE DOW
| Date | Open | High | Low | Close | Volume | Adj Close* |
| 19-Oct-07 | 13,888.47 | 13,888.47 | 13,478.94 | 13,522.02 | 4,160,970,000 | 13,522.02 |
| 18-Oct-07 | 13,887.90 | 13,984.39 | 13,746.22 | 13,888.96 | 3,203,210,000 | 13,888.96 |
| 17-Oct-07 | 13,920.66 | 14,075.84 | 13,738.66 | 13,892.54 | 3,638,070,000 | 13,892.54 |
| 16-Oct-07 | 13,986.34 | 14,061.37 | 13,810.68 | 13,912.94 | 3,234,560,000 | 13,912.94 |
| 15-Oct-07 | 14,092.43 | 14,157.38 | 13,877.82 | 13,984.80 | 3,139,290,000 | 13,984.80 |
| 12-Oct-07 | 14,016.34 | 14,168.51 | 13,949.85 | 14,093.08 | 2,788,690,000 | 14,093.08 |
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THE NASDAQ
| Date | Open | High | Low | Close | Volume | Adj Close* |
| 19-Oct-07 | 2,799.32 | 2,799.32 | 2,725.16 | 2,725.16 | 2,371,650,000 | 2,725.16 |
| 18-Oct-07 | 2,778.31 | 2,803.26 | 2,770.11 | 2,799.31 | 1,973,010,000 | 2,799.31 |
| 17-Oct-07 | 2,801.66 | 2,803.96 | 2,755.26 | 2,792.67 | 2,400,080,000 | 2,792.67 |
| 16-Oct-07 | 2,770.03 | 2,781.80 | 2,759.43 | 2,763.91 | 2,038,520,000 | 2,763.91 |
| 15-Oct-07 | 2,809.17 | 2,811.66 | 2,764.68 | 2,780.05 | 1,967,120,000 | 2,780.05 |
| 12-Oct-07 | 2,779.79 | 2,806.18 | 2,778.29 | 2,805.68 | 1,957,790,000 | 2,805.68 |
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THE S&P 500
| Date | Open | High | Low | Close | Volume | Adj Close* |
| 19-Oct-07 | 1,540.00 | 1,540.00 | 1,500.26 | 1,500.63 | 4,160,970,000 | 1,500.63 |
| 18-Oct-07 | 1,539.29 | 1,542.79 | 1,531.76 | 1,540.08 | 3,203,210,000 | 1,540.08 |
| 17-Oct-07 | 1,544.44 | 1,550.66 | 1,526.01 | 1,541.24 | 3,638,070,000 | 1,541.24 |
| 16-Oct-07 | 1,547.81 | 1,547.81 | 1,536.29 | 1,538.53 | 3,234,560,000 | 1,538.53 |
| 15-Oct-07 | 1,562.25 | 1,564.74 | 1,540.81 | 1,548.71 | 3,139,290,000 | 1,548.71 |
| 12-Oct-07 | 1,555.41 | 1,563.03 | 1,554.09 | 1,561.80 | 2,788,690,000 | 1,561.80 |
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In the last month, the 4 largest US banks have come out with the results of their earnings which really shouldn’t be a surprise because everyone has been talking about it for the last 6-12 months. For some reason, many investors are only realizing the true nature and implications of the housing credit crunch and everything it indirectly affects like the economy going into a possible recession. According to Bloomberg:
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Wachovia declined $1.74, or 3.6 percent, to $46.40. The fourth-biggest U.S. bank reported its first earnings decline in six years and missed analysts’ estimates after a record $1.3 billion of writedowns for bad loans and mortgage-backed securities.
Citigroup, the largest U.S. bank, declined $1.47 to $42.36, its lowest value since June 2003. Bank of America, the second biggest, fell $1.28 to $47.57. JPMorgan, the No. 3, retreated 88 cents to $45.02.
Profit at the five biggest U.S. banks totaled $18.7 billion for the quarter, the lowest in almost four years, as demand for securities linked to mortgages and leveraged loans dried up.
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Across the globe, European Banks in the last month have had the same issues in regards to mortgages. Bloomberg also reports:
HSBC retreated 2.1 percent to 923.5 pence. UBS lowered its recommendation for the shares to “neutral” from “buy.”The London-based bank will probably report additional losses on U.S. subprime mortgages in the third quarter and be affected by slowing economies in the U.S. and Europe next year, analysts including Alastair Ryan wrote in a note today.
“Third quarter 2007 is set to look bad” for HSBC Finance Corp., the bank’s U.S. subprime unit, UBS wrote.
Alliance & Leicester Plc, Britain’s seventh-largest bank, dropped 2.8 percent to 735 pence. Northern Rock Plc, the lender bailed out by the Bank of England, lost 8.6 percent to 186.9 pence.
Banks retreated across Europe after Wachovia Corp. of the U.S. joined America’s largest banks in predicting more loan defaults.
WPP dropped 4.2 percent to 665 pence. Third-quarter sales excluding acquisitions and currency swings climbed 4.8 percent. That compares with the 5.6 percent median estimate of six analysts surveyed by Bloomberg.
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What does this all mean? It means we as a nation are headed into some rough times ahead. Some of us already are feeling the effects of the housing fallout. Especially if you work in the real estate field or any of its related businesses. We already have had mass layoffs and it looks like the costs of oil and other commodities are skyrocketing which will mean higher gas prices at the pumps for us. Officially, the recession has not started. According to the dictionary: a recession is when the state of the economy declines; a widespread decline in the GDP and employment and trade lasting from six months to a year. I believe from the news I read we will be experiencing this soon. It looks like it will affect European nations as well.
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In anticipation of the coming recession, I personally have started buying more things now and stocking up because prices will go up. I have paid down my debt. I have sold all my stocks and will re-start my dollar cost averaging system. After the dot com bubble burst 7 years ago, I had started buying technology stocks that I thought would survive. Fortunately, I picked winners like Amazon, EBay, and Apple when they were literally dirt cheap and had taken a beating. I still think they are all great stocks for the long term. I am just trying to lock in my gains and avoid any future losses. I definitely sold early and before the top of the market, but since I can’t tell exactly when that is I played it safe. Obviously, I can be completely wrong on how I interpret the news and the financial numbers I follow, but better safe than sorry, right? 