Stocks were beaten senseless once again today as earnings reports and concerns over the economy continue to worsen. This was the worse two day drop in the markets since the famed 1987 crash.
The retail sales data for October was horrifying. Retailers reported the worst October sales in over 30 years:
" NEW YORK (Reuters) - Retail chains posted the worst October sales results in more than three decades as consumers cut spending sharply, stunned by a financial crisis that has derailed the U.S. economy.
The International Council of Shopping Centers called the retail sales environment "simply awful" and said the October results were the worst it had seen for that month in 35 years.
The ICSC said it pared its forecast for what were already expected to be dismal holiday season sales. It now expect sales in November and December to rise 1 percent, down from its prior view for a gain of 1.7 percent.
"The great unknown is just how much lower can consumer spending go?" said Piper Jaffray analyst Jeff Klinefelter. "With savings rates at historic lows and constraints on the availability of consumer credit, I just think there's concern that the perfect storm is brewing."
What can I say? The consumer is tapped folks. We all knew this was coming. It looks like Christmas is going to be an absolute disaster this year. This data offers us more proof that the economy came to a standstill in October.
Disney's earnings miss also provided more proof that the consumer is toast :
"Nov. 6 (Bloomberg) -- Walt Disney Co., the world's biggest theme-park operator, said fourth-quarter profit fell 13 percent, as a slowdown in U.S. consumer spending caused earnings to decline at four of its five business units. The shares dropped.
Net income declined to $760 million, or 40 cents a share, from $877 million, or 44 cents, a year earlier, Burbank, California-based Disney said today in a statement. Excluding one-time items such as bad debt from Lehman Brothers Holdings Inc.'s bankruptcy, profit of 43 cents missed the 49-cent average estimate of 19 analysts compiled by Bloomberg.
Profit fell at Disney's television and radio business, theme parks, film division and the merchandise unit. Park bookings have ``slowed meaningfully,'' Chief Executive Officer Robert Iger said on a conference call, as he announced discounts to attract visitors. Media competitors News Corp., CBS Corp. and Viacom Inc. have also lowered forecasts.
``The quarter was uglier than anyone anticipated'' at Disney, Janna Sampson, co-chief investment officer at Oakbrook Investments LLC in Lisle, Illinois, said in an interview. ``Going forward, it becomes a question of how long and how deep this economic recession will last. And that's very, very difficult to predict.''
Total jobless rolls rose to a 25 year high as initial jobless claims came in higher than expected:
"Nov. 6 (Bloomberg) -- More Americans than anticipated filed first-time claims for unemployment benefits last week and total jobless rolls climbed to the highest level in 25 years, indicating further deterioration of the labor market.
Some 481,000 workers filed initial claims in the week ended Nov. 1, the Labor Department said today in Washington, exceeding the 477,000 projected by economists surveyed by Bloomberg News. The number of people staying on benefit rolls was the most since February 1983."
There are clear signs of deterioration in all areas of the economy. There was so much bad news today that I really didn't know where to start. I mean for example, the 10-year yield rose on a day when yields should have dropped. As I have explained before, investors usually flock to the safety of treasuries when the market tanks. The fact that they are avoiding the 10 year tells you there are concerns about our debt and the economy in the bond market.
Another thing that was announced today was the Fed's balance sheet is now over $2 trillion dollars. No wonder the 10 year doesn't look so safe anymore!
California announced that it wants to raise taxes by $4.4 billion dollars. This is what you gotta do when your state is about to go bankrupt. This will put further pressure on the consumer as their take home pay takes a hit. The housing market and anything consumer related will take another blow if these taxes are approved. Homebuyers will have less income from which to buy a house. The California dreamin is slowly turning into the California nightmare.
Folks, its getting hard to even watch the news right now its so depressing. I think I need to start popping a Prozac before I start blogging. I didn't even get a chance to mention the big 3 auto summit with Nancy Pelosi that's going on tonight. GM is hangin on by a thread and losing more than $1 billion a month. They are on their hands and knees begging the government for help.
CNBC reported today that 2.5 million jobs will be lost if there is a 50% reduction in the automotive industry. That would be catastrophic for the Midwest. I would guess you will see a bailout here but that doesn't mean you won't see a 50 percent reduction among the big 3.
If people aren't buying cars then they aren't going to make them. They can get bailed out all they want, the production lines ain't going to be moving if there are no orders. Expect major job losses in this area as a result.
I wish I had better news folks. Now that most of the October numbers are in, we can officially declare that this month was a total disaster for the economy. We are now staring into the abyss and the market hates uncertainty. Investors are now asking themselves one question:. Was October the beginning of a depression or a one month anomaly?
Put me in the "severe recession/depression" camp in terms of where we go from here.
As for trading, I held my shorts into the close. I didn't add to my positions. There are no good entry points at these levels.
Tomorrow is all about the jobs report. If its horrific, we could plunge for a third day in a row. I would also keep an eye out for any automotive summit news. Oh and don't forget, keep an eye on treasury yields. I have deep concerns about the bond market.