An abundant amount of bad news today caused an abrupt halt to the three-day winning streak of the Dow Jones Industrial Average and the four-day increase of the S&P 500. Poor reports on unemployment claims, home sales, and earnings forced the Dow to fall 226.44 (-2.7%) and set the S&P back 28.95 points (-3.31%) to 845.14.
Two records were broken today, and they were very bad records to break. The total number of people receiving unemployment hit a record high at 4.78 million for the week ending on January 17. The Associated Press has estimated that almost 130,000 jobs have been lost so far in January.
It’s no surprise that there is a correlation between the massive amount of layoffs in recent months and a drop in home sales. December home sales dropped 14.7% to an adjusted annual rate of 330,000 home sales per year, a record low.
If breaking the records for two key indicators of economic frailty scared investors away, the addition of horrible reports from major companies terrified them. Starbucks announced that they will be cutting 7,000 jobs, Kodak will lay off 3,500 to 4,500 workers, and Allstate will release 1,000 employees. Starbucks’ earnings fell by two-thirds, Kodak posted a $137 million fourth quarter loss, and Allstate reported a $1.13 billion dollar loss in the fourth quarter. Ford lost $5.9 billion in the last quarter of 2008, bringing the car company’s total losses for the year to a record $14.6 billion.
There were some glimmers of good news amongst the bad. Amazon reported that its fourth quarter profit increased by 9%. The online retail giant even claimed that its last holiday season was its “best ever.” Amazon gained 13% in after-hours trading.
Until Tomorrow,
Matt Schwartz
College Trillionaire
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