Today was another painful day on Wall Street. The Dow dropped 281.40 points to close at 6594.44. The S&P 500 reached its lowest level in 12-1/2 years. What we’re seeing is the opposite of irrational exuberance, it’s irrational pessimism.
All the bad news is coming at once. Today, GM‘s (GM) auditors said that the company may not be viable. I can’t say I’m surprised. Citigroup (C) fell below $1 a share. For the fifth straight week, the Labor Department reported that more than 600,000 Americans filed claims for unemployment benefits.
Even one of my favorite alternative energy stocks, Fuel Systems Solutions (FSYS), delivered a rotten earnings report. The company earned only five cents a share last quarter, which was far below estimates of 42 cents a share.
Bad economic news is happening all over the world. The economy in the eurozone contracted by 0.5% during the fourth quarter of 2008. In response, both the Bank of England and the European Central Bank cut interest rates by 0.5% today. The BOE now has rates at their lowest level in the bank’s 315-year history.
All of today’s selling is in advance of tomorrow’s jobs report. Nearly everyone, including me, expects to see a very poor report.