Corporate earnings reports due, Fed policymakers to discuss interest rates
It was the fat cats’ fault before. But now it’s becoming Obama’s.
With the unemployment rate stubbornly high, people were already shifting blame for their economic woes to President Obama one year into his presidency.
Last week, investors joined them.
For 10 months, the stock market climbed at breathtaking speed.
But the Dow Jones industrial average suffered its worst week since dropping to a 12-year low in early March.
It fell 552 points Wednesday through Friday, including 216 on Friday.
This week is chock-a-block with news that could help shares retrace their lost ground, or sink further.
The Federal Reserve meets on interest rates, Bernanke faces that reappointment battle in the Senate, a cavalcade of earnings reports is due and the government gives its first estimate of how the economy performed during the final three months of 2009.
One big reason investors last week scrambled to sell: fear over a wave of populism that swept a Republican to an upset victory in the Massachusetts Senate race on Tuesday. When Obama responded on Thursday with a broadside against big banks, the market plunged.
On Friday, investors feared that mounting opposition in the Senate could derail Federal Reserve Chairman Ben S. Bernanke’s reappointment.
Disappointing corporate earnings and concern that China will slow its economy added to the jitters.
The question now: If the bad news continues, will Obama, who is trying to win votes in the fall elections with his populist attacks, end up losing them instead?
Put another way, can Obama win over Main Street by vilifying Wall Street if people fear opening their 401(k) statements again?
“The longer we’re in [power] the more it becomes our problem,” said Tad Devine, a Democratic media consultant. And that’s especially true for voters who have a stake in the stock market.
For years the number that politicians worried about was the unemployment rate.
In the 1970s a second figure was added: inflation.
Now, with 45% of households owning mutual funds, up from 6% in 1980, there’s a third: the Standard & Poor’s 500 index.
It’s anyone’s guess whether jobs and stocks will be up when Americans head to the polls in November.
And even before the events of the last week, the stock market was jittery.
Investors had driven shares up at their fastest pace in decades, and analysts said many were looking for an excuse to sell.
A clear sign the market was in trouble came a week ago Friday. Chip maker Intel announced that profits were a lot higher last quarter than analysts had expected. But its stock fell anyway.
Last Tuesday after Martin Luther King Day, the indexes hit 18-month highs in anticipation of Republican Scott Brown’s victory in Massachusetts. Health insurance and pharmaceutical companies led the gains because a Brown victory endangers the massive healthcare bill favored by Obama and the Democratic majorities in Congress.
But stocks began falling fast on Wednesday when China announced plans to slow its economy.
They fell again the next day after Obama’s speech calling for limits on the size of banks and their risk taking.
A big blow for the market came Friday. In a nod to voter anger at Wall Street, a few Democrats said they wouldn’t vote to reappoint Bernanke, whose term ends Sunday. But many investors have faith that Bernanke has the tools, the know-how and the political backbone to reel in the unprecedented amount of money pumped into the economy during the financial crisis and avoid a crushing round of inflation. The Senate is expected to approve a second term for Bernanke, who has Obama’s support, this week.
The S&P 500 index closed the week at 1,091.76, down 5.1% in three days -- its biggest drop since March 2009.
Hank Smith, chief investment officer of equity at Haverford Investments in Radnor, Pa., warned investors to expect more stock gyrations.
Condon and Paradis write for the Associated Press.
