The US Collapses …. Again

Yes, the Roller Coaster ride that is the US is back in full swing. As I commented the other day,

In my opinion, Wall Street needs to take a step back and really focus on it’s countries fundamentals and ensure that these massive swings are stabilised. Intense focus needs to be on fiscal and monetary policy to ensure that the financial implications of all these capital injections is actually positive for the US economy.

And it seems like they have just done that – and the verdict is not good. The Dow Jones (DJI) fell more than 700 points overnight to finish down 7.9% at 8,577.91, the index’s third fall below the 9,000 point mark in the past five trading sessions. Things weren’t much better on the Technology front either with the Nasdaq (NASDAQ) falling 150.68 points, or another 8.5% to 1,628.33 – the same level it was at in 2003 and its worst single day drop since the tech implosion of 2000.

So what is the reason for all this ?

Well it’s very clear – US Fundamental Economic Data. The US Commerce Department released sales data for September – and the news was not good. Retail sales plummeted more than 1.2.% – double what was expected and signaling very troubling times in the US retail market. Of course, consumer spending is what drives companies – without significant spending, companies can’t earn revenue and that means that they can’t operate. More than other countries, US retail spending drives almost two-thirds of all consumer spending in the States.

Further, to all this joyous news, is the fact that the US Labour Department released data showing the second consecutive month of declines in US producer prices – with the core rate, which excludes food and energy, climbing higher. From the report, it seems that overall prices declined 1.2% for intermediate goods and fell more than 7.9% for crude goods. (It’s important to note that price changes for raw materials don’t translate directly into retail prices because of internal costs included by firms in retail prices – i.e. transportation costs, refrigeration costs, storage costs, distributor costs etc etc – these aren’t included in this pricing)

It’s clear things are still definitively uncertain in the US, and until more economic data is released to really show the true picture – it’s going to continue to be a wild ride.