Joshua Freed's Friday afternoon report on the week's results in the stock market at the Associated Press spent nine paragraphs telling readers how the current budget battle in Washington and possible government shutdown are causing stocks to retreat.
Though he obviously didn't admit it, Freed's narrative fell apart in later paragraphs as he discussed "mixed economic signals" which aren't mixed at all. They range from "pretty bad" to "really bad." Excerpts, mostly about the "mixed signals," follow the jump (bolds are mine throughout this post):
STOCKS FALL ON GOVERNMENT SHUTDOWN WORRIES
The budget fight may be happening in Washington, but it's investors on Wall Street who keep getting smacked.
... The Dow Jones industrial average fell 70.06 points, or 0.5 percent, to close at 15,258.24. The Standard & Poor's 500 index fell 6.92 points, or 0.4 percent, to 1,691.75. The Nasdaq composite was down 5.83 points, or 0.15 percent, at 3,781.59.
Still, the indexes are off only about 1 percent for the week, and the S&P 500 is just 2 percent below its record high set Sept. 18.
... Investors are also dealing with mixed economic signals.
On Friday, a government report showed that incomes and consumer spending grew slightly last month. The increases suggest anemic growth that is not strong enough to accelerate the economic recovery.
A survey showed that consumer confidence declined this month as Americans worried about the possible government shutdown and their own finances. The survey found that half of households expect no pay increase in the coming year.
The Federal Reserve's view last week that the economy is still weak is scaring people, said Frank Fantozzi, CEO of Planned Financial Services.
"If you keep saying things are bad, even if things are good, people are going to believe they're bad, and they're going to act accordingly," he said.
Did anyone else see Joshua Freed mention a positive economic item? I didn't think so.
Freed's definition of "mixed" must be a combination of "pretty bad" and "very bad."
There are quite a few other troubling items I could add to the "mix." Here are just two.
New-home sales data from the Census Bureau indicated that the sharp decline in monthly sales seen in July was not a one-time event. 43,000 new homes were sold in June, but only 34,000 were sold in July. August's bounceback, at 35,000, was barely noticeable. Yet the press still portrays the home construction as a supposed economic leader in the so-called recovery.
Additionally, Renee Dudley at Bloomberg News reported on Wednesday that Wal-Mart is planning for a mediocre fourth-quarter for both economy-related and self-inflicted reasons. Dudley's filing also tells us that retailers in general are bracing for a weak fourth quarter and Christmas shopping season:
Wal-Mart Cutting Orders as Unsold Merchandise Piles Up
U.S. inventory growth at Wal-Mart outstripped sales gains in the second quarter at a faster rate than at the retailer’s biggest rivals. Merchandise has been piling up because consumers have been spending less freely than Wal-Mart projected, and the company has forfeited some sales because it doesn’t have enough workers in stores to keep shelves adequately stocked.
... U.S. chains are already bracing for a tough holiday season, when sales are projected to rise 2.4 percent, the smallest gain since 2009, according to ShopperTrak, a Chicago-based firm. Wal-Mart cut its annual profit forecast after same-store sales fell 0.3 percent in the second quarter.
Of course, we also have to recognize that stock prices are being artificially influenced to an unprecedented degree by the Federal Reserve's "quanitiative easing," aka "electronically printing $85 billion a month to buy U.S. Treasury and mortgage-backed securities." Recent weeks' market swings have shown that whether and when the Fed plans to "taper" dominates investors' thoughts even more than economic fundamentals.
Bottom line: Freed's report uses the possible government shutdown as an excuse to mask weakening economic fundamentals. If the market tanks, it will be primarily because of the latter and not the former.
Cross-posted at BizzyBlog.com.