On the eve of the onset of the biggest consumer shopping period of the year, the economic front does not look cheery. Not surprisingly, with all the bad economic news and high oil prices, retailers are worried and rightfully so. In my view, things are going to get much worse before they get better. Note how the housing market free fall and high energy costs combine to play through out the news. Here are some highlights form a mew Washington Post story (http://www.washingtonpost.com/wp-dyn/content/article/2007/11/21/AR2007112100362.html?hpid=moreheadlines) that some some of the unpleasant economic news:
NEW YORK -- Wall Street resumed its slide Wednesday as unease about the wilting mortgage market and the broader economy triggered selling ahead of the unofficial start of the holiday shopping season. The Standard & Poor's 500 index and the Dow Jones industrial average each fell by more than 1.5 percent, with the Dow giving up more than 210 points. The decline in the S&P 500 left the index in negative territory for the year. Many investments such as mutual funds either track or are measured against the S&P.
Economic readings did little to instill confidence among investors. The Mortgage Bankers Association said mortgage application volume fell 3.6 percent last week. Meanwhile, the slump in housing suggested banks will continue to face souring mortgage debt. Government-sponsored lender Freddie Mac, which reported a $2 billion quarterly loss Tuesday and saw shares plummet nearly 29 percent, declined again Wednesday after an analyst downgrade. Countrywide Financial Corp., the nation's largest mortgage lender, also lost further ground.
In other economic news, the Conference Board suggested an economic slowdown could accelerate in the coming months amid rising costs and further weakness in the housing market. Also, the Reuters/University of Michigan consumer sentiment survey showed its lowest reading in two years _ an unwelcome development for retailers entering what is for many the most important period of the year.
And with oil prices briefly reaching a high of $99.29 a barrel in overnight electronic trading, the question among investors is no longer if oil will reach $100 a barrel, but when _ and how long it will stay there. Crude futures fell 74 cents to settle at $97.29 per barrel on the New York Mercantile Exchange after an Energy Department report showed supplies at a closely watched oil terminal in the Midwest rose for the first time in weeks.
"The high price of oil has hurt retail, entertainment, restaurants and clothing," said Don Hodges, chairman of Hodges Capital Management in Dallas. He attributes the market's recent retrenchment to concerns about energy, the consumer, housing and banking among other factors and notes that previous sharp drops in the market have occurred when investors have faced a similar confluence of worries.
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