Is the stock market turning bearish? Watch Friday's jobs report.
After sliding for 8 days, the Dow's meager 30-point bump on Wednesday leaves investors 'very nervous,' say analysts. But the experts aren't sweating 鈥� yet.
In this Sept. 25, 2008 file photo, a Wall St. street sign is shown in front of the American flag hanging on the New York Stock Exchange in New York.
Mary Altaffer / AP / File
New York
Even though the stock market finally broke its eight-session losing streak, investors are starting to wonder if the stock market is such a good deal.
On Wednesday, after being down most of the day, the Dow Jones Industrial Average finally managed to pick up 29.82 points by the closing bell. Despite the gain, the Dow is down about 7 percent over the last nine trading sessions. As a result, stock advisors describe investors as 鈥渧ery nervous.鈥�
Initially, many investors were shaken by Congress's game of chicken over the national debt ceiling. Then, after several days of glum economic news, they became more concerned. Now, many are beginning to question whether the stock market 鈥� up about 5,300 points from the Dow's March 2009 lows 鈥� is still the place to have their money.
鈥淚t鈥檚 a very fair question,鈥� says Mark Lamkin, CEO of Lamkin Wealth Management in Louisville, Ky. 鈥淲e had a really nice bull market but I think the market may have rebounded a little ahead of itself.鈥�
Mr. Lamkin believes a key test for the stock market will come on Friday, when the government reports the July jobs and unemployment numbers.
鈥淚 can鈥檛 remember a more important jobs report,鈥� says Lamkin. 鈥淚f they pop to 200,000 or better, the market will rally fiercely,鈥� he says. 鈥淏ut, if they are 50,000 or less, we could shave 300 to 400 points off the Dow. And, if they come out as a gain of 90,000 to 110,000 鈥� right below analysts鈥� expectations 鈥� we will have a sideways pattern.鈥�
Many investors remain committed to the stock market because corporate earnings remain strong.
鈥淭here is no indication companies will not continue to do relatively well,鈥� says Frank Fantozzi, chief investment strategist for Planned Financial Services, a Cleveland-based money manager. 鈥淐ompanies' earnings are still very solid.鈥�
Mr. Fantozzi believes the stock market is facing 鈥渟trong headwinds,鈥� but not yet anything to sink it. He thinks it will take a week or so for the markets to rebound from the trauma of watching Congress struggle with the debt ceiling. 鈥淥nce we start to stabilize, I think we鈥檒l finish the year with a gain of 7 percent to 9 percent for the year,鈥� he says.
Not everyone is so optimistic.
The stock market鈥檚 slide south could continue even further, says Andre Weisbrod, president of STAAR Financial Advisors in Pittsburgh, Pa.
He says a 10 percent drop in stock prices is normal after such a large run-up. In fact, he considers the most recent drop 鈥渁 pause鈥� consistent with other pauses in prior bull markets.
If the market dips a little more, he will look for bargains, Mr. Weisbrod says. 鈥淚 have a lot of stuff I鈥檇 like to buy.鈥�
But if the stock market continues to fall, dropping some 15 to 20 percent, 鈥渢hen the stock market is telling you something,鈥� he says.
In the past, however, stock markets have predicted recessions that never happened. 鈥淚t seems like once or twice a year we go through dips that suggest an expansion is failing,鈥� says Fred Dickson, chief investment strategist at D.A. Davidson & Co. in Lake Oswego, Ore.
Mr. Dickson recalls a market slide back in 2004, during the Clinton presidency, when the Federal Reserve tightened interest rates to cool the economy.
鈥淭he stock market fell but there was no recession,鈥� he remembers.
Now, Dickson thinks the market is giving 鈥渁 low but increasing probability of a recession.鈥� But, Dickson says those concerns will dissipate at year end as business races to take advantage of a tax credit for new investments that expires at the end of the year. This will lead to renewed growth, he predicts.