Where things stand: They could be worse
Stocks suffer their worst weekly loss since late 2012, and the markets face a tough week ahead with Caterpillar, Apple, Amazon.com and Exxon reporting.
The bottom line is the stock market has caught up to the global economy. The question going forward is, how deep could a slump last.
The Dow Jones industrials ($INDU) fell 2.1% for the week, the worst for the blue chips since the week of Dec. 12, 2011, when the blue chips fell 2.6%. The Standard & Poor's 500 Index ($INX) slid 2.1%, the worst week since the week of Nov. 5. And the Nasdaq Composite Index ($COMPX) dropped 2.7%, its worst week since the week of Oct. 8, 2012, when it fell 2.9%.
Not great numbers, but there have been worse weeks, like the week of Aug. 1, 2011, when the debt-ceiling crisis erupted and Standard & Poor's downgraded U.S. debt. The Dow fell 5.8% at that time, with the S&P 500 off 7.2% and the Nasdaq down 8.1%.
Gold (-GC) in New York settled every day below $1,400 an ounce. It hadn't closed below $1,400 since early 2011. Gold was down 7.1% for the week and is down 16.7% for the year. And, yes, it's in a bear market: It's down 26% from its peak in 2011.
Crude oil (-CL) in New York finished up 28 cents to $88.01, down 3.6% for the week and 4.2% for the year. Gasoline was at $3.506 a gallon on Friday, according to AAA's Daily Fuel Gauge Report. That was down from Thursday's $3.512 and down 7.4% from a 2013 peak.
And the hard part of the year is ahead. There is perceived slowness in China: economic growth for the latest quarter was estimated at 7.5%. That would be great anywhere else, but China has been growing at better than 10% a year for several years.
There is a recession in Europe. Auto sales, continent-wide, were down 10% in March from a year ago. Ford Motor (F) doesn't see the slump ending before the end of the year. That means Ford's North American operations and those of General Motors (GM) will have to carry Europe.
And there have been signs that U.S. economic growth is slowing; not that it was booming, but retail sales in March weren't as robust as expected. Auto sales were strong but not great. And manufacturing and services in the United States overall have slowed. Job growth in March was a disappointment, even if the unemployment rate fell to 7.6%.
A real slowdown? Probably. The end of the world? Probably not. The global economy has softened considerably in the second quarter every year since 2010, with the stock market fading 10% and more each year --- before a strong recovery set in.
This year looks no different, although strong recovery hopes may be held back by the fact the Dow and S&P 500 hit new records in April.
The economy often weakens for a period in the course of a year, but the second quarter isn't that special time, Standard & Poor's equity strategist Alec Young says. It's just that weakness has materialized in the quarter.
In 2010, it was due to fading U.S. housing data. In 2011, it was higher oil prices and a major earthquake in Japan. In 2012, it was the ongoing European debt crisis.
So here's what the market faces now.
Earnings next week. Especially Caterpillar on Monday morning and Apple after Tuesday's close.
Caterpillar noted Friday that retail sales of its equipment world-wide were down 11% in March from a year go. That includes an 11% decline in North America, 8% in Europe -- and 24% in the Asia-Pacific region dominated by China.
Caterpillar is expected to earn $1.49 a share for the first quarter, down from $2.37 a year ago. Revenue may fall 14.1% to $13.7 billion. That's why the shares are down 10.2% for the year and down 31% since peaking on Feb. 23, 2012.
Apple has a different problem. There are big worries that its iPhone sales are losing their mojo to Samsung (SSNLF) and others. So analysts expect the company to report $10.07 a share in earnings, down from $12.30 last year. Revenue will be up 8.4% to $42.49 billion.
Not bad numbers, but Apple shares finished Friday at $390.53 and are down 44.6% from their peak in September. Its Thursday close of $392.05 was its first below $400 since December 2011.
The awful slide had subtle but probably negative effects on the stock market. A lot of hedge funds have dumped Apple for Google (GOOG). Samsung's lower-priced smart phones are selling strongly, especially in non-U.S. markets.
Apple has a lot of cash it can use to buy in shares, and there are big hopes the company will announce something to support the stock. If CEO Tim Cook doesn't announce that something, look for the stock to slide more.
Also reporting next week: Caterpillar and Halliburton (HAL) on Monday, AT&T (T), DuPont (DD) and Yum! Brands (YUM) on Tuesday; Boeing (BA) and Ford on Wednesday; and Exxon Mobil (XOM) and Amazon.com (AMZN) on Thursday. Chevron (CVX) is Friday's big report.
A special callout: United Parcel Service (UPS) on Thursday. UPS and rival FedEx (FDX) are looked at bellwethers for the economy. FedEx was down 4.1% this past week. UPS was off 1.4%.
The big economic report: This would be the Commerce Department's gross domestic product report for the first quarter. The report measures U.S. economic growth in the first quarter. Look for an annualized 3% growth rate, with warnings things won't be so good because of federal spending cuts and international issues.
Strong Recovery, from fake money that has only increased, everywhere? This will end badly and likely without any real warning to Stock Markets that up to this point, are the biggest benefactors.
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