Tomorrow’s Turkey may taste a little drier for those with exposure to equity markets, particularly blue chips, as the Dow Jones Industrial Average on Wednesday could not maintain its midday rally, dropping 150 points in the last hour of trading.
The late sell-off pushed the Dow to its lowest close since April 17 as it closed below 12,800. The Dow started the day on a sour note as crude oil neared $100 in overnight trading and consumer sentiment dropped to a two-year low according to the Reuters /University of Michigan Survey of Consumers. The Index dropped to 76.1 in November, down from 80.9 in October, and well below the 92.1 recorded in November of 2006. “Rising prices for fuel and food had a devastating impact on household budgets, and falling home prices have diminished consumers’ sense of financial security,” said Richard Curtin, Director of the survey, in a release.
The results could not have come out at a worse time as we are entering the holiday shopping season. The retail sector historically does a good chunk of its annual sales over the next six weeks. Higher energy costs will eat into consumer’s disposable cash and the end of housing bubble means consumers no longer can tap the home equity ATM.
And shoppers may soon realize that cheap non-U.S. goods are not so cheap any more as seven years of our current “strong dollar policy” has reduced the purchasing power of the once strong greenback.
The survey said that the risk of a recession developing is uncomfortably large and noted that recent surveys have recorded the largest gap in 25 years as to how different income groups assessed their financial situation.
Happy Thanksgiving.
