Stocks Down For Third Straight Week

Three weeks ago I mentioned how that week seemed like it could have been an inflection point for the markets. The relentless rise in long Treasury yields coupled with a declining dollar started to take the steam out of the historic bear market rally. Thursday's unexpectedly horrible jobs report indicates that the economy has not yet stabilized and most likely is still contracting. The resumption of the bear market may have begun at the inflection point three weeks ago. Thursday's 200 plus point decline after the employment news had the feel of crisis again. I think the next few weeks will be crucial in determining the direction of the stock market for the rest of the year.-Lou

U.S. Stocks Retreat for Third Week in Longest Slump Since March

By Rita Nazareth
July 3 (Bloomberg) -- U.S. stocks fell for a third straight week, the longest losing streak since March, on concern deeper- than-estimated job cuts and a drop in consumer confidence will prolong the recession.

American Express Co., Caterpillar Inc. and Alcoa Inc. lost at least 6.2 percent after the unemployment rate rose to the highest level in almost 26 years. National Oilwell Varco Inc. and Hess Corp. sank more than 6.8 percent as oil slumped to a five-week low of less than $67 a barrel. American International Group Inc. tumbled 38 percent after disclosing new risks on derivatives sold to banks.

The Standard & Poor’s 500 Index slid 2.5 percent to 896.42 this week. The

Dow Jones Industrial Average fell 157.65 points, or 1.9 percent, to 8,280.74. The Russell 2000 Index of small companies retreated 3.1 percent to 497.21. U.S. stock markets are closed today in observance of Independence Day.

“The unemployment picture continues to be grim,” said

E. William Stone, who oversees $100 billion as chief investment strategist at PNC Wealth Management in Philadelphia. “That’s strong enough to make people believe that the market has gotten a little bit ahead of reality.”

The S&P 500 has slumped 5.3 percent since June 12 on concern the 40 percent, three-month surge in the index outpaced prospects for an economic recovery. Even though the S&P 500 gained 15 percent in the second quarter for its best rally since 1998, the advance stalled in June, leaving the index up less than 0.1 percent for the month. Investors are paying 14.2 times profits from S&P 500 companies during the past 12 months. When the valuation reached 15.5 on June 2, it was the most expensive since October.

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