WASHINGTON, March 20, 2014 – Spring may have sprung today. Or, more correctly, a bit later today as we reach the official spring equinox around lunchtime. But world stock markets are still in the grips of a new ice age this morning. At the very least, they’re experiencing a severe bout of global cooling.
Starting with Wall Street Wednesday, exchanges around the world dropped precipitously around mid-afternoon EDT yesterday. The reason: In her first press conference as chief U.S. financial honcho (honchette?) new Fedhead Janet Yellen, having not quite mastered the exquisite banalities and ambiguities of Bernanke-speak (an offshoot of Greenspan-speak) created the impression that interest rates would rise much sooner “than expected” as financial journalists are accustomed to writing.
Reaction was swift. Stocks tanked in New York, as they eventually did in Tokyo, Hong Kong, Germany (DAX), Paris (CAC), London (FTSE), and where ever else freaked out investors and gleeful short sellers could get involved in the panic. The icy plunge was très ugly although it’s not yet a rout.
But this morning’s futures back in New York were looking pretty nasty as of about 7 a.m. this morning, with the Dow Jones Industrials off 59 points, the S&P 500 off nearly 6, and the tech heavy Nazz off nearly 13. (As we finish this, the market has just opened with the Dow off 25 and the S&P 500 down nearly two.)
Perhaps the amazing Great Lakes ice-over of 2014 is spreading down to Lake Champlain, into the Champlain Canal, and down to the Hudson, chilling everything, including hapless traders, in its path, creating automatic carbon offsets in its wake.
In point of fact, the state of the union is not particularly good this morning or this year for that matter, and everybody knows it. Foreign policy flops, persistent unemployment and underemployment and that dratted healthcare stuff are getting in the way of President Obama’s vacations and tee times and that’s never a good thing for the country.
Speaking of unemployment, that was actually a bright spot in Yellen’s presser yesterday as she acknowledged on record, for pretty much the first time, that the Fed was going to start de-emphasizing that magical 6.5 percent unemployment target top bankers have bandied about for some time as the threshold for raising interest rates slowly back up to relatively normal levels.
But Yellen essentially acknowledged what we’ve been preaching here since, oh, 2008 or so; namely that the official unemployment rate is phony baloney and that at the very least, we should be paying more attention to the U-6 rate which takes into account workers who’ve dropped off unemployment comp rolls or have otherwise given up ever finding a job along with those who are underemployed or employed part time in a desperate attempt to pay their bills.
It’s been over 6 years of “Great Recession” now for the average working stiff and it’s nice to see at least someone in Washington has deigned to notice this. Maybe Janet Yellen doesn’t hit the links as often as other Washington and Wall Street elites do.
As we wrap this up, the market still appears to be happy staying in the freezer locker. But volume remains iffy and we lack a clear trend, although the current rally is beginning to resemble one of those frozen, Ice Age mummies at this point. Those mummies generally don’t thaw well, and we’re not sure the market will do much better, at least at the moment.
Given the international political backstories, like Crimea and the missing Malaysian airliner to mention a couple, we’ll likely sit out today’s inaction. Perhaps you should, too. There’s always tomorrow, and it’s options expiration week as well. Too dangerous to guess.