Will a stagflation epidemic push stocks into a bear market?
"FACED WITH MOUNTING EVIDENCE of an economy in decline and lenders in recoil, stocks fell to their lowest level in more than 18 months and now stand on the brink of a bear market.
That there was bad news was hardly surprising by now. But the extent of disappointing developments still spooked investors hoping that bad news was already factored into stock prices.
Locating the source of the market's apprehension was tough, for there was much to choose from: A deepening credit crisis and balking lenders led to high-profile defaults at Thornburg Mortgage, the second-largest independent U.S. mortgage company, and at an investment company sponsored by the Carlyle Group. Housing shows no sign of repair, as foreclosures hit a record last quarter and 5.82% of home loans fell delinquent. Businesses from Intel to Staples told investors they were feeling the pinch. Missing the magic of yet another Harry Potter sequel, Barnes & Noble cut its profit forecast and proved that books, sadly, are no longer the 'recession-resistant' diversion they once were.
On Friday, the government said that employers cut 63,000 jobs in February, the most in five years. The toll would have exceeded 100,000 were it not for government hiring, and private-sector pink slips fanned out from manufacturing to retail. Back-to-back months of layoffs -- and the third straight month of private-sector job cuts -- have often coincided with recessions, rendering any refusal to acknowledge the "R" word today seem less like hope and more like denial."