Chin Up in the Downswing


Chin Up in the Downswing: Stimulus Package Working, U.S. Trade Deficit Lessening, Markets May Be Heading Back Up

March 13, 2009 06:15 PM
by Anne Szustek
Some positive economic indicators of the day: the stimulus package is working, says top economic official; the trade deficit is narrowing; and if recent trends are an indication, the S&P 500 is poised for a rebound.

Summers Says Stimulus Package Beginning to Show Positive Effects

According to U.S. National Economic Council Chief Lawrence Summers, the $787 billion stimulus package is already producing positive results since being signed into law last month, including infrastructure projects worth billions, health insurance maintained for furloughed workers and the rescue of thousands of jobs. Speaking at Washington, D.C., think tank Brookings Institution, he also said that consumer spending has been “stabilized” and that there is “one ineluctable lesson of the history of financial crises: They all end.”

President Barack Obama voiced similar thoughts Friday afternoon after meeting with former Fed chief and current Economic Advisory Board Chair Paul Volcker: “If we are keeping focused on all the fundamentally sound aspects of our economy, all the outstanding companies, workers, all the innovation and dynamism in this economy, then we're going to get through this,” Obama was quoted as saying by The Washington Post.

U.S. Trade Deficit Dwindling

International trade data indicate that the U.S. trade deficit may be declining for the sixth month in a row. Key contributing factors include lower consumption—Americans are buying less—and cheap oil. “Economists harped over how this data was always too large as we were sending dollars overseas away from the U.S.,” writes 24/7 Wall St.’s John C. Ogg. Exact statistics on the size of the trade deficit differ: Bloomberg puts it around $38.1 billion and Dow Jones estimates $37.3 billion.

Two Months of Steady Trading on the Way?

Based on trends seen over the past year, this Friday the 13th may be a lucky day for the markets, writes CMC Markets chief foreign-exchange strategist Ashraf Laidi on financial site Seeking Alpha. Since the middle of March 2008, when Bear Stearns was bailed out by the Federal Reserve, the S&P 500 has shown bullish and bearish periods, each lasting roughly two months. Based on past trends and current indicators, Laidi predicts that we are about to enter a new two-month period of steady trading.

“With the likely duration of the current rally expected to last for about 8 weeks and extending for about 25%, the S&P500 may reach the 840–850 level,” Laidi writes. As a point of reference, the S&P 500 was at 756.55 as of 4:45 p.m. Friday afternoon.

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