Plunging bond yields. Should give a nice boost to the housing market in January, especially in New York City, when the record bonuses will be spent.
Posted on 12/27/2005 1:36:38 PM PST by SierraWasp
Dow slumps triple digits as Treasury yield curve inverts ($INDU, $COMPQ, $SPX, $TNX) by Tomi Kilgore
NEW YORK (MarketWatch) -- U.S. stocks closed sharply and broadly lower, with the Dow industrials suffering its first triple-digit loss in 2 months, as the Treasury yield curve inverted for the first time in five years, sparking fears of a possible recession. The Dow ($INDU) slumped 105 points to an unofficial close of 10,778, its lowest close in 2 weeks and the biggest one-day point loss since Oct. 27. The Nasdaq Composite ($COMPQ) shed 22 points to 2,227 and the S&P 500 ($SPX) slid 12 points to 1,257. The 2-year Treasury note yielded 4.347% while the 10-year Treasury yield ($TNX) fell 0.039 percentage points to yield 4.341%; the only time in the last 30 years that an inverted yield curve wasn't followed by a recession was in 1998, when the curve inverted briefly during the Asian financial crisis. Recession worries overshadowed a sharp drop in natural gas prices amid reports of warmer-than-usual weather, with the front-month futures contract tumbling 10% to a 4-month low of $11.022 per million British thermal units on the New York Mercantile Exchange.
(Excerpt) Read more at bigcharts.marketwatch.com ...
Thank the Fed.
If they hadn't overreached in their raising of short term rates, there wouldn't be a yield curve inversion.
I remember clearly the recession of 1998.
An inverted yield curve is a good recession indicator except when it's not.
ditto
I believe the term you're looking for is "right once in a row."
Yeah. Me too.
I think it's more of an indicator that the increases in interest rates are going to stop. A lot of times, they stop because the Fed has overshot the target and caused a recession. This time, if they stop in time, maybe that's not a problem (rates were really awfully low before, now they are more normal.)
It would be a great thing if they could just stop raising rates now, and leave things alone and let the economy coast for a few years without screwing around with it.
I felt the recession pass. It's over already. Everyone can relax now.
Morons.. loser sell-off to claim losses for 2005. It'll all get bought back in about ummm... 31 days.
Exactly what is wrong with a strong economy with low inflation that precipitates continual rises in the short term rate?
YOU ARE CORRECT.
Today was the last day of the year to sell your losers and get the tax benefit this year.
I had forgotten all about that. Then again I have no dogs to get rid of.
That is exactly what I was thinking. It's tax-protection week for the big traders.
Sellers can get the tax benefit if they sell any time this week.
I don't like blaming any single incident for a one-day move in the stock market. We should all check up on this thread in a few months.
YOu got it. End of year profit-taking.
The market is driven by rumor, the drop in gas and oil prices are hedge funds locking profits, there has been a lot of play in that area. It seems to be a good time to bargain pick.
Gee, thanks Fed.
i got $35 oil by the end of the year wrong - in my fantasy game, but speculators are going to pay for betting against the American dream in 2006.
Doesn't it still take 3 days to settle (t+3) in which case tax losses taken tomorrow will be settled in the new year.
You are all on record as saying today's stockmarket activity is the result of end-of-year tax selling. Is that a prediction that the stock market will decline all this week? If the stock market rises over the next three days, how can you reconcile that with your tax selling theory? Will you remember your explanations for today's activity on the stock market after today?
Trade date, not settle date, is used by IRS.
You'll see that ALL the time EXCEPT when a notably strong sector rotation is going on...under "normal" conditions one S&P point is worth 7-10 DJIA points. Eg; they most generally work in direct tandem, together, one doesn't "forecast" or "lag" the other.
I agree with you, though, something weird is going on. (if that's what you're saying!)
This question is like asking why Daddy won't let Junior run the power saw.
It does not indicate recession. It simply indicates that investors think interest rates will be lower in the future.
It'll all get bought back in about ummm... 31 days.
Actually if they were smart they would have filed with the IRS a certain way last year where they can sell losers and buy back any time they want. The 30 day rule is not in this type of filing. If I remember right it's called Mark to Market, and please correct this anybody who knows for sure.
I wonder what effect this may have on the market for Schwartzenegger's massive bondage for infrastructure???
I like the way you think!!!
Plunging bond yields. Should give a nice boost to the housing market in January, especially in New York City, when the record bonuses will be spent.
The smart ones ain't spending their bonuses on NYC real estate.
I beg to differ. We were in recession in 2000/2001
What? Short term rates, or long term rates? Wouldn't either of those rates becoming lower stimulate the economy? Then why is this Dow Jones owned news service speading such stupendous lies???
Oh! And wouldn't lowering interest rates seen in the future make the bond market go nuts with glee???
Time to panic.
"Mark to market" is (in this case, for this reference) a method of accounting for stock/security gains and losses which is more in line with the way a frequent trader works. The trading dept of a Goldman Sachs or Lehman almost certainly works in this fashion; an individual trader has to apply to use the method a solid year or more in advance (eg; you cannot decide retroactively that you were a daytrader last year and use the method) There are a number of implications, not all of which are clearly beneficial or detrimental. For one, I believe you're correct, that the "wash sale" rule need not apply. Also, I think the $3K limit on capital losses/yr doesn't apply. One who elects this method may also cut themselves off from cap gain treatment on stock gains. Also, I think the M2M election is irrevocable. As usual, there is a highly readable/sarc IRS publication detailing the particulars.
Yup.
Nah, I'm keeping my cool.
If the economy could grow as well as it did in 2005 despite natural disasters and very high energy prices then 2006 should be at least decent. If you haven't noticed, energy prices are tanking.
I am always paniced. I am typing this from my Y2K shelter.
Here tis, Dog Gone! I fergot ta Ping ya!!!
That is objectively false. There was no recession in 1988.
In the last 30 years, the yield curve has had to invert by two percentage points or more for a recession to occur. I haven't seen anyone predicting that kind of inversion as yet.
The article didn't say "1988!" It said 1998!!!
and paying off Santa...
"If they hadn't overreached in their raising of short term rates, there wouldn't be a yield curve inversion."
I hate it when the yield curve inverts.
I assert that there was an inverted yield curve in December 1988, and no recession. The article says that 1998 was the only time that there was inversion with no recession. I say that isn't true.
The last time we had inversion by two percentage points or more was 1980.
They are about done raising rates. The power range is 2-5%, which is where they are. If the economy turns south, there is room to lower rates for a couple years. But, it is time for mortgage lenders to start making some money.
You were in a 4G, inverted dive with a Mig-28?
Yes ma'am.
*cough* bullsh*t! *cough*
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