Friday, December 05, 2008

Wall Street Ends on a High Note

Wall Street ended the week on a high note, with the Dow closing up about 3%. The other indexes did even better, with the S&P finishing 3.6% higher, and the Nasdaq closing up 4.4%. This market upswing happened despite dismal employment numbers, and a new report that U.S. retailers posted the worst November sales in more than three decades. Stocks reversed early losses and closed sharply higher as the data raised hopes that Washington will again step in to help the economy. The market's advance left Wall Street with only moderate losses for the week, the result of a nearly 680-point slide in on Monday.

While the deluge of bad economic readings have weighed on the markets in the past three months, investors are growing somewhat accustomed to the news, and so hopefully the roller coaster will start to flatten out. The stock market, which generally looks ahead, tends to recover six to nine months before economic reports show a recession is abating. At some point, investors likely will determine that a recession has been fully built into the market's expectations and will begin placing bets on a recovery. I think we have not reached this point yet, but we could be drawing closer.

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