Stocks Stumble As Yield Curve Inverts

Associated Press ^ | 27 December 2005 | Ellen Simon

[rhombus]

NEW YORK (AP) -- Stocks stumbled Tuesday as the bond market gave signals that in the past have preceded economic slowdowns.

The yield curve, the spread between the yields of short-term and long-term bonds, inverted for the first time in five years. That means short-term interest rates are higher than long-term interest rates. Investors have been watching the yield curve closely because, in the past, inverted yield curves have usually preceded a recession.

[rhombus]

Don't people sell off stock losers at the end of the year anyway?

[xrp]

For market/DJIA/Wall Street savvy Freepers, what is the consensus on the outlook for 2006?

[xcamel]

Yup, and buy them back 31 days later

[xcamel]

If the dims get put in their place, and we don't get attacked or blind sided, it'll be another great year.

[Lekker 1]

Is it me, or did this AP story have a certain amount of glee in it?

[razoroccam]

Dare one use the "R" word here. Inverted yields are quite predictive in this respect.

[rhombus]

Is it me, or did this AP story have a certain amount of glee in it?

I detected it too. I expect Paul Krugman will be weighing in telling us we are all doomed because of tax cuts.

[2banana]

To avoid a recession - is a good reason for tax cuts. Dems will push for higher taxes.

[antaresequity]

Don't people sell off stock losers at the end of the year anyway?

Yep...nothing to worry about here...its a buying opportunity.

When price/earnings ratios get to 100, then you should worry about selling...not a moment sooner...

/sarc

[Recovering_Democrat]

The sky is falling. not.

[Fiddlstix]

BTTT

[groanup]

For market/DJIA/Wall Street savvy Freepers, what is the consensus on the outlook for 2006?

Look for the Wall Street Journal to have its poll of a couple of hundred ecnomists within the next two weeks. Remember: 9 out of 10 years the consensus is wrong. The problem is, you don't know if they're too high or too low.

[DManA]

Market is sensing that inflation is not a factor for the forseeable future.

[groanup]

"The ecnomic forecasting ability of the yield curve has been greatly diminished."

Alan Greenspan.

We'll see.

[Alberta's Child]

I'm predicting that 2006 will be somewhat similar to 2005 as far as the stock market is concerned.

Keep in mind that even a "flat" market is not necessarily a bad thing, since the 2002-03 tax changes have prompted companies to distribute larger dividends.

[epluribus_2]

Yup, that 9% jump over last year in Xmas spending was a very bad sign of things to come, indeed. [/rat]

[DManA]

Gold market is reacting to a supply/demand situation. Price needs to rise until gold miners find it profitable to produce to fill the demand.