S&P In Correction's Shadow

The S&P remains in correction mode this weekend,being down 10.6% from its April high.For the week,the index fell 4.2,while the Dow stumbled 4.0 and the NASDAQ crumbled 5.0.Yes,the Eurozone debt crisis was a fundamental concern;but it wasn't just Europe.Unemployment claims here rose sharply and unexpectedly,up 471,000.Two important manufacturing reports,the Philly Fed and the Empire State,showed a decline in new orders,and the index of Leading Economic Indicators was down as well.
In sum,the recovery went on vacation this week,leaving investors behind to contemplate a return to serious worry.The idea of a double dip recession had been receding this year to almost invisibility,but has a renewed credence now.Cash is looking more attractive than it has in some time as we grope our way through a new maze of uncertainty.Indeed,it seems the path of wisdom until the fear index settles back at least somewhat.
The futures are a mute equation.Both the equity and bond futures are up,indicating confusion about what lies ahead.Baseball is simpler.Baltimore led Washington tonight in inter league play,while Virginia was topping Miami in college ball.

An Echo of March

The market gave an echo of the bad times of last March this week,the worst weekly decline since that bottom.It had been foreseen for months.No market can keep ascending without pause or correction.Yet that is just what people have been expecting of earnings.When their hyper-expectations weren't met this week,they sold off.Other problems were the fear of Paul Volcker-inspired regulatory reform,which is odd,since the former chairman of the Federal Reserve is widely admired on Wall Street.It must be admiration from a distance.China contributed to the decline as well,ordering banks to stop lending so much,which threatens to create bubbles.Corrections occur when a tipping point is reached.All the worries that had been hidden reach a critical mass and come tumbling out together.In the end,it's a helpful development.Only when reality is admitted to can a market resume its upward trajectory.There are things out there that can hurt us,and now we are conscious of them,we can resume our financial journey through earnings season.