By Clyde Noel

Market leaves investors dejected

When Sun Microsystems told the truth about lower earnings last week, investors tanked the stock and took a lot of other high-tech firms with it.

At the same time a government report showed consumers curbed their spending in July and that made the Dow industrials close below 10,000, and the Nasdaq to hit a four-month low.

We are witnessing a sharp, fast slowdown in the economy and we can’t find the bottom. The market has always been an indicator of what the economy will be like in six months, and if we look toward the future we have a lot to worry about.

There is no sign of an economic turnaround and that produces the bad air around the market. After four straight days of a bear attack, a negative outlook still prevails. Friday, the Dow returned to it’s winning ways by being up 30.17 points, and the Nasdaq 13.75 points.

Trading was thin last Friday before the long three day holiday. For the week, the Dow industrials finished at 9949, down 4.51 percent. The Nasdaq composite finished at 1805, down 5.70 percent. The Town Crier index fell 4.83 percent and is now down 19.18 pecent for the year.

The International Money Fund (IMF) says there may be a recession similar to the ones we had in early 1980, and if the United States continues to miss growth expectations, it can trigger a fall for the dollar and a drop in stock markets worldwide.

Layoffs will start increasing because companies will try to show a profit in the 4th quarter. The jobs outlook has a big effect on consumer confidence and consumer spending and when a person wonders “Will I be next” they don’t spend as much and this effects inventories of manufacturing companies.

Third quarter earnings will be the worst this year and help continue the market slide. Analysts predict the market will hit bottom within the next 4-8 weeks. On the positive side, earnings will increase next year and then we will see a pickup in the stock market.

For the Dow, the very near term level to keep an eye on will be 10,000. Despite disclaimers regarding its significance, the level is important from a psychological perspective and is a modestly notable technical level as well.