Bear Reality: Perfect Storm of Bad News

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via Yahoo!:



Bear Reality: Perfect Storm of Bad News
Posted Jul 07, 2008 09:46am EDT by Aaron Task in Investing, Recession, Banking

Related: GE, FNM, AA, ^GSPC, ^DJI, GS, FRE
Updated from 9:46 a.m. EDT

A debilitating decline since mid-May left the Dow and Nasdaq more than 20% below their market peaks last week, and the S&P on the verge of a similar bear market demarcation.

As is typically the case, the bear's technical arrival has brought accompanying attention to the market's woes. Often, the market bounces when times look worst and fear is rampant; some say that describes the current environment and stocks were higher early Monday.

But don't expect anything more than short-term trading bounces for a while, says Dan Colarusso, managing editor of Portfolio.com, who believes forecasts for a big second-half earnings rebound is "wishful thinking." Stocks have been hit by a "perfect storm of bad news" – from surging oil prices, to the deleveraging of Wall Street - and the bear market is likely to last for a while, he says.

History suggests Colarusso is right: Since 1940, the average bear market has lasted 386 days and produced a peak-to-trough decline of 30.4% for the S&P 500, Barron's reports.

Update: The Monday morning rally was indeed short-lived. Major averages tumbled midday amid renewed concerns about financials, a point Colarusso made repeatedly in the accompanying video.

Fannie Mae and Freddie Mac are the primary issue for traders after a Lehman analyst said the two GSEs might need to collectively write down an additional $75 billion if forced to comply with a new FASB ruling.

Elsewhere, Goldman shares are down after its second-quarter trading figures showed the firm lost money on 20 trading days during the quarter, including 9 days with losses of $100 million or more, Bloomberg reports.


http://finance.yahoo.com/tech-ticker/article/32541/Bear-Reality%3A-Perfect-Storm-of-Bad-News