U.S. Stocks Suffer Worst Week in Four Months
The Dow lost 2% last week to mark the sharpest weekly decline in four months.
These losses occurred despite the Obama Administration's best efforts to tout the highly controversial surprise drop in unemployment to 7.8%.
At least three factors explain last week's stock sell-off.
First, investors are bracing themselves for next week's release of sales and earnings reports from a dozen Dow components--including companies like General Electric, Bank of America, Intel, and American Express--and quarterly results for 80 S&P 500, including the big banks.
"Any bad news will not be handled well," said Joseph Saluzzi, co-head of
equity trading at Themis Trading. "If earnings disappoint, I think the
market will continue to sell off."
Second, with Spain being the only euro zone country considering whether to request bailout funds, market analysts are anxious to know how the nation plans to handle its crippling debt.
“We’re all waiting on Spain now,” chief investment
strategist at PNC Asset Management Group Bill Stone told the Wall Street Journal. "In the U.S., there’s the fiscal cliff and election to deal with, and on
the European side, they still have to figure out their fiscal issues."
Finally, the U.S. Treasury Department announced on Friday a $1.089 trillion deficit for the 2012 fiscal year. That marks the fourth year in a row that the United States has had a trillion dollar deficit, a fact GOP Vice Presidential nominee Paul Ryan pounced on in last week's vice presidential debate. “We’ve had four budgets, four trillion-dollar deficits," said Mr. Ryan. "A debt crisis is coming. We can’t keep spending and
borrowing like this. We can’t keep spending money we don’t have.”
In May of this year, President Obama's proposed 2013 budget was unanimously rejected in the U.S. Senate 99 to 0. The year prior, Mr. Obama's 2012 budget was rejected 97 to 0.