Where's the relief?
The Associated Press reports that I.B.M. Results Fuel a Rally on Wall Street. Propelled by better-than-expected earnings from I.B.M., stocks surged in early trading today for the fifth time in six sessions.
IBM made its numbers through cost-cutting. Cost-cutting means lower sales. Cost-cutting means people without work. People without work mean consumer confidence will continue to suffer (Note that the actual consumer confidence in the report I linked to has been falling, while the Expectations Index has risen -- this reflects hopes that are being dashed by new layoffs). A couple years back, the market would rally on poor employment news, because it meant that inflation would be held at bay and the Fed would keep interest rates low. Today, layoffs and cost-cutting mean we're heading into a deflactionary cycle. The market is not rational, it is insane.
Posted by Mitch Ratcliffe at October 17, 2002 10:17 AM | TrackBack