Retail sales report sinks stock market
January 14, 2009 by admin
The health of the U.S. economy became a little clearer following the release of the December retail sales report on Wednesday. The stock market took a sharp turn lower following news that retail sales fell by over 2.7% last month, much worse than most economists had predicted. The sluggish retail sales report is a good indication that consumers are pulling back in spending as economic conditions continue to decline nationally.
The steep decline with retail sales marks the furthest drop in the market since December of 1990. Consumers have pulled back sharply as the job and housing markets have failed to stabalize. The new Presidential administration is promising a large and broad economic stimulus program to try and stabalize the U.S. economy. Most economists now believe that the economy will not begin to recover until their is a stabalization with home prices and a slowdown with home foreclosures.
Moving forward there are few reasons for optimism over the next two quarters. The market should begin to benefit from the Fed’s monetary policy changes and historic low interest rates. Refinance applications are up with every major lender for consumers trying to lock in low mortgage rates. The drop with oil prices will benefit consumers as they will have more discressionary income. The market has few other bright spots and will need to see home values begin to stabalize and companies begin to hire and recruit for a true end to the largest economic crisis since the great depression.