Wall Street Is Starting To Freak Out About The Horrendous State Of The Economy
By Michael Snyder/Economic Collapse Blog August 03, 2024
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It looks like investors are starting to figure it out. Bad economic numbers continue to come pouring in, but so far the Federal Reserve has refused to pull the trigger on a rate cut. We have seen this story before, and it never ends well.
It is often said that "he who hesitates is lost", and in this case the Fed's hesitation could mean a tremendous amount of economic pain during the months ahead.
Stocks fell sharply on Friday as a much weaker-than-anticipated jobs report for July ignited worries that the economy could be falling into a recession...
The broad market index dropped 1.84% to end at 5,346.56. The Nasdaq Composite lost 2.43% to close at 16,776.16, bringing the decline for the tech-heavy index from its recent all-time high to more than 10%. The Dow Jones Industrial Average fell 610.71 points, or 1.51%, to finish at 39,737.26. At its session low, the 30-stock index was down 989 points.
Stocks sank after July job growth in the U.S. slowed more than expected, while the unemployment rate rose to the highest since October 2021. Nonfarm payrolls grew by just 114,000 last month, the Labor Department reported, a slowing from 179,000 jobs added in June and below the 185,000 expected by economists polled by Dow Jones. The unemployment rate increased to 4.3%.
The 10-year Treasury yield fell to its lowest since December as investors flooded into bonds for safety on the fear the Federal Reserve made a mistake this week by keeping interest rates at current levels.
Some megacap names saw steep losses during the day, as Amazon's second-quarter results sparked investor concerns about Big Tech's blowout levels of artificial intelligence-related capital spending. The e-commerce giant slid 8.8% after missing the Street's revenue estimates and issuing a disappointing forecast. Intel, meanwhile, cratered 26% after announcing weak guidance and layoffs. Nvidia lost 1.8%, following a 6% loss a day before.
The Nasdaq is the first of the three major benchmarks to enter correction territory, down more than 10% from its record high. The S&P 500 and Dow were 5.7% and 3.9% below their all-time highs, respectively
Many still believe that the Fed will give us a rate cut in September.
But there are others that are concerned that "the Fed may not be acting quickly enough to keep America's job market in good shape"...
The narrative on Wall Street is shifting.
Traders have long placed their bets on the Federal Reserve cutting rates in September, and Fed Chair Jerome Powell basically confirmed as much Wednesday.
That rate cut, expected in six weeks, was priced in to stocks, which have been rising over the past few months in hopes of a cut. Rate cuts tend to juice stocks, because they lower borrowing costs for businesses and can help boost profits.
But now, fear is starting to take hold, as concerns mount that the Fed may not be acting quickly enough to keep America's job market in good shape.
Economist Claudia Sahm is one prominent expert that is deeply alarmed by the Fed's lack of action.
Considering all of the troubling numbers that we have seen in recent days, she is wondering what they are waiting for...
If the Federal Reserve is starting to set the table for interest rate reductions, some parts of the market are getting impatient for dinner to be served.
"What is it they're looking for?" Claudia Sahm, chief economist at New Century Advisors, said on CNBC just after the Fed concluded its meeting Wednesday. "The bar is getting set pretty high and that really doesn't make a lot of sense. The Fed needs to start that process back gradually to normal, which means gradually reducing interest rates."
DoubleLine CEO Jeffrey Gundlach is using even stronger language.
He says that the Fed is risking a recession by not making a move now...
DoubleLine CEO Jeffrey Gundlach also thinks the Fed is risking recession by holding a hard line on rates.
"That's exactly what I think because I've been at this game for over 40 years, and it seems to happen every single time," Gundlach said, speaking to CNBC's Scott Wapner on "Closing Bell" on Wednesday. "All the other underlying aspects of employment data are not improving. They're deteriorating. And so once it starts to get to that upper level, where they have to start cutting rates, it is going to be more than they think."
Of course there are many numbers that seem to indicate that we may already be in the early stages of a new recession.
For example, earlier today we learned that the ISM manufacturing index was in contraction territory once again last month...
The ISM (Institute for Supply Management) Manufacturing PMI registered 46.8% last month, indicating industry economic activity contracted at a faster rate when compared to June's figure of 48.5%.
"After breaking a 16-month streak of contraction by expanding in March, the manufacturing sector has contracted the last four months," says Timothy Fiore, chair of the ISM's manufacturing business survey committee.
In addition, initial applications for unemployment benefits jumped to the highest level in about a year last week...
New economic data revealed that first-time applications for jobless benefits rose last week to an estimated 249,000 filings. That's the highest tally since last August, according to the Labor Department. Meanwhile, continuing claims, filed by people who have received unemployment benefits for at least a week, jumped to 1.877 million. That's the highest level since November 2021.
Sadly, a lot more layoffs are coming as thousands upon thousands of businesses get into very serious trouble all over the nation.
This week, we learned that a furniture retailer that had survived the Great Depression, the Great Recession and the COVID pandemic is closing all 380 of their stores and filing for bankruptcy...
A 120-year-old furniture chain will shutter all 380 stores after its parent company filed for bankruptcy -- the latest brick-and-mortar business to buckle from high overhead costs and massive debt.
Badcock Home Furniture & More, which has stores throughout the South, announced a "going out of business" sale Tuesday.
The company was purchased last year by Conn's, a Texas-based furniture retailer, which filed for bankruptcy last week.
After 120 years, this is how it ends.
Of course there are lots of other retailers that have also been going belly up this year...
Other furniture chains, including Bob's Stores, Z Gallerie and Mitchell Gold + Bob Williams, filed for bankruptcy this year.
Overall, US retailers had announced the closure of almost 2,600 stores in 2024.
If the U.S. economy really is in "good shape" like the mainstream media is insisting, then why is this happening?
At the same time as all this is happening we have our national debt now surpassing 35 trillion dollars, and even the New York Times is admitting that it is growing "more quickly than many economists had predicted"...
America's gross national debt topped $35 trillion for the first time on Monday, a reminder of the nation's grim fiscal predicament as legislative fights over taxes and spending initiatives loom in Washington.
The Treasury Department noted the milestone in its daily report detailing the nation's balance sheet. The red ink is mounting in the United States more quickly than many economists had predicted as the costs of federal programs enacted in recent years have exceeded initial projections.
To mark this milestone, the House Budget Committee released some numbers about how rapidly our debt has been growing over the last 12 months...
$196 billion in new debt per month
$6.4 billion in new debt per day
$268 million in new debt per hour
$4.5 million in new debt per minute
$74,401 in new debt per second
The third number in that list really stands out to me.
268 million dollars is being stolen from future generations of Americans every single hour of every single day, and hardly anyone seems to care.
We are literally committing national suicide.
When a government borrows money which must be paid back later, prosperity in the future is being sacrificed for more prosperity in the present.
We were 10 trillion dollars in debt when Barack Obama entered the White House, and now we are 35 trillion dollars in debt. We have literally destroyed the bright future that our children and our grandchildren were supposed to have, but all of this borrowing has allowed us to enjoy a standard of living that is far higher than what we actually deserve.
Unfortunately, we have reached a point where economic conditions are steadily getting worse even though our government continues to pile up mountains of new debt.
According to the Department of Housing and Urban Development, homelessness in the U.S. has been growing by an average of about 10 percent a year since the pandemic ended...
According to data from the U.S. Department of Housing and Urban Development (HUD), since the end of the pandemic, we have experienced an average of 10% a year growth in homelessness. By the end of 2023, the U.S. hit its highest reported level in history since they began tracking it in 2007.
That same report says that the four states that have the largest problems with homelessness are California, New York, Florida and Washington...
The largest populations of homeless people are mainly in four states: California, New York, Florida and Washington. New Hampshire and New Mexico saw the largest increases in homeless people, with 52% and 50% respectively. New York came in third, moving up by 39% since the last survey.
In addition to growing homelessness, we are also seeing poverty and hunger rise all over the nation...
Combined data released last month from federal agencies found the U.S. is facing growing rates of poverty and food insecurity. In 2023, more than 12% of the nation was living below the poverty line and nearly 13% said they didn't have enough to eat. Ann Oliva, CEO of the National Alliance to End Homelessness, said, "More people are becoming homeless for the first time." This increase is due to people becoming un-housed faster. "They have no place to go so they end up on the streets."
Our national debt has gone from 10 trillion dollars to 35 trillion dollars since Barack Obama first entered the White House, and our economy is still crumbling.
This represents an epic failure of historic proportions.
We have accumulated the largest mountain of debt in the history of the world, and most of the population is still struggling.
But all of this money has created an immensely painful cost of living crisis.
Today, there are six major U.S. cities where you will only be able to live a middle class lifestyle even though you are making $200,000 a year...
Earning $200,000 a year might seem like enough to live a life of luxury.
But in six of the 25 biggest US metros, rampant inflation in the past two years means this six-figure salary is only enough to be middle class.
Of course the vast majority of Americans will never make $200,000 a year.
In fact, most Americans are just barely scraping by.
As I discussed last week, one recent survey discovered that 71 percent of U.S. adults are stressed out about their "ability to afford everyday expenses"...
71% of Americans say they're stressed by their ability to afford everyday expenses.
Americans most regularly spend money on groceries, phone bills, utilities, gasoline and rent/mortgage payments.
Grocery bills frustrate Americans more than any other regular expense. Utilities, rent/mortgage payments, gasoline and insurance payments round out the top five most annoying expenses.
Are you constantly stressed out about your finances?
If so, you certainly aren't alone.
Unfortunately, things are only going to get worse from here.
Decades of incredibly foolish decisions have set the stage for a colossal collapse.
The bubble we have been riding will inevitably burst, and once that occurs the consequences will be absolutely excruciating.
Here in 2024, red flags are popping up on an almost daily basis and the stock numbers on Friday could just be the beginning of much worse to come.
As conditions get even worse during the second half of this year and beyond, our leaders will attempt to stabilize things by doing even more of what they have already been doing.
But that will just make the cost of living crisis even worse, and it will just make our long-term problems even worse.
Of course our long-term problems are rapidly becoming our short-term problems.
The entire system is convulsing with tremors, and our bubble economy is slowly but surely heading toward a date with oblivion.
In my opinion, we are experiencing the leading edge of an economic storm which will greatly intensify during the second half of 2024.
And the outlook for 2025 is absolutely dismal.
So what should you do about all of this?
In the short-term, protect your assets and build up a sizable emergency fund. No matter what happens, you are going to need to have enough money to pay your bills.
In the long-term, I am entirely convinced that we are going to experience the most painful period in our entire history.
Our leaders have been making incredibly bad decisions for decades, and now we have entered a time when the consequences of those decisions will become obvious to all of us.
Originally published at The Economic Collapse Blog
