Stock Market Outlook

Today could turn out to be an important day in the ongoing financial and economic crises. Stock markets overseas are riding declines of about 3%. European trading suggests that US stocks may decline even more today, perhaps as many as 300 Dow points.

The moves are significant because we’ve now decisively broken below the “technical support” level provided by the multiyear low reached in 2002. And we’re falling from a higher peak this time.

Stock markets are clearly discounting the fact that the Obama team are fighting the crisis with good intentions and not a whole lot more.

They’re also discounting an outlook for corporate earnings that could hardly be worse. I think that Q1 earnings will be very spotty, but on the whole will surprise on the upside, possibly setting up a rally in early April. But between now and then, the weakness may trigger waves of margin calls and panic selling, as in November. There’s no discernible bottom from here if that happens.

There’s not much more to say other than, let’s hope for the best.