The National Bureau of Economic Research have concluded and declared that the U.S. economy has been in a recession since December 2007. After a conference call on Friday, the committee determined that the expansion period beginning November of 2001 had ended last December. The NBER defines a recession as two consecutive quarters of declining economic activity spread across the economy.
Upon the news, markets suffered a terrible day making this Monday one to forget. The Dow, Nasdaq, and S&P took percentage losses of 7.7%, 8.95%, and 8.93% respectively. After a loss of 679 points, the Dow finished at 8,149 points. The Nasdaq closed at 1,398 points and lost 137 points. The S&P suffers a fall of 80 points and closed at 816 points. Along with a declaration of the “R” word, consumer spending fears for the upcoming holiday season played a part in today’s sell off.
Crude Oil settled at $49.28 per barrel, falling 9% on the day. OPEC officials delayed a decision on output for their meeting later this month. Since September, OPEC has already cut 2 million barrels per day.
The price of natural gas closed at $6.56, while heating oil and gasoline futures finished the day at $1.61 and $1.11 respectively. Gold fell to $770 on the day.
Federal Reserve chairmen Ben Bernanke said that further interest rate cuts are “feasible”, but also that the Fed can act in other ways to bolster the economy; such as buying longer-term treasuries and purchasing more securities backed by consumer debt.
Banking giant JPMorgan (JPM: 26.12, -5.54 (-17.50%)) announced that they will be cutting 9,000 jobs at Washington Mutual by the end of next year. JPMorgan acquired Washington Mutual in September saving it from collapsing. Bank of America (BAC: 12.85, -3.40 (-20.92%)) and Merrill Lynch (MER: 10.13, -3.09 (-23.37%)) announced similar plans to cut 10,000 jobs from the combined investment banking unit once the merger closes. This is a significant number, considering that both sides will have about 50,000 bankers post merger before the cuts.
General Electric (GE: 15.50, -1.67 (-9.73%)) saw a drop in share price today as investors await the details of the reorganization of GE Capital which should be released tomorrow morning. GE plans to save $2 billion through this reorganization of its finance division.
-Hassan Chaudhry
Disclosure: The mutual fund the author is associated with is long JPM
