Wall Street and the financial markets had their own reaction to Obama's inauguration yesterday...the worst Inauguration Day sell-off in history:
U.S. stocks sank, sending the Dow Jones Industrial Average to its worst Inauguration Day decline, as speculation banks must raise more capital sent financial shares to an almost 14-year low.
State Street Corp., the largest money manager for institutions, tumbled 59 percent after unrealized bond losses almost doubled. Wells Fargo & Co. and Bank of America Corp. slumped more than 23 percent on an analyst’s prediction that they’ll need to take steps to shore up their balance sheets. The Dow’s 4 percent slide was the most on an Inauguration Day in the measure’s 112-year history, according to data compiled by Bloomberg and the Stock Trader’s Almanac.
“All the banks are going to have to recapitalize,” said Greg Woodard, portfolio strategist at Manning & Napier Advisors Inc., which manages $16 billion in Fairport, New York. “That’s not done. That’s in front of them, and we don’t want to try to get in front of that trade.”
The S&P 500 plunged 5.3 percent to 805.22. The S&P 500 Financials Index fell 17 percent to below its lowest closing level since March 1995 as concern European banks need more capital also weighed on the group. The Dow average slid 332.13 points to 7,949.09. Both the Dow and S&P 500 retreated to two- month lows.
The S&P 500 is off to its worst start to a year, shattering the biggest rally since World War II, as analysts cut earnings estimates by a record 83 percentage points and companies signal worse to come.
The S&P 500 is down 11 percent in the first 12 trading days of 2009, exceeding last year’s 9.2 percent drop, according to data compiled by Bloomberg going back to 1928. The decline helped erase more than two-thirds of a 24 percent rally since Nov. 20 as optimism that government spending would revive the economy evaporated.
The 'rally' they're talking about involved the smarter players eithe rpicking up corporate assets at fire sale prices or dumping most of their holdings and getting into cash. That part of the action's over, which is why trading volume is down. What's happening now is that the rest of the herd is catching on and playing follow the leader.
From the day Obama was elected to his inauguration the S&P 500 index has lost 17% of its value, after taking a look at Obama's proposed cabinet and hearing the gist of his economic plan. That can't be blamed on Bush. It counts as the "Obama crash".
Unless the new president offers something very different, and quickly,he's going to be the modern equivalent of Herbert Hoover, and his fall in the public esteem could be even quicker than his rise. Bush is history, and while the media and the Democrats will try to spin it, if the economy continues to deteriorate there will be no one left standing to blame but Obama.
Before the US entered World War II, Franklin Delano Roosevelt borrowed no more than 6% of gross national product as deficit spending in any one year. During his first year in office, Obama will have borrowed roughly double that amount.
Not good.
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