Monday Market Blues More Than Just a Glitch

An investor would think strong overall retail sales on the day following U.S. Thanksgiving would result in a strong stock market. Not so for this market. Investors were handed a big surprise a couple of days ago when the Dow Jones Industrial Average fell the most in five months on Monday, losing 1.3% of its value in a single day.

And what a bad day is was for the stock market:

—Wal-Mart said monthly sales declined for the first time in 10 years. Since the company is the world’s biggest discount retailer, this was obviously bad news for retail.

—The U.S. Dollar Index fell to a low not seen since March, 2005.

—Oil prices jumped back above $60 U.S. a barrel on report OPEC may cut production again.

While most of the financial media was focusing on one of the three stories above for the Monday meltdown, I didn’t see any story telling it simply like it is:

The Dow rose above its record high recently, bringing investors back into the market. But there is no real reason for the general stock market to rally as consumers are tightening their purse strings, housing is going from bad to worse, company earnings are slowing, the U.S. Fed has raised interest drastically, the yield curve is inverted, the economy is slowing and overvaluation exists everywhere in big-cap and blue-chip stocks.

After luring many investors back into the stock market, Monday’s tumble in stock prices was a simple bear taking investors’ money again. Note Goldman Sacks, Bear Stearns, Merrill Lynch, and other big brokerage house stocks were all down big-time on Monday. Goldman Sachs was down 4.2% and the NYSE Group (owner of the NYSE) was down 6.6%! When a broker’s stock is hit this hard you know it’s not Wal-Mart, a weak U.S. dollar, or oil that’s causing concern. No: It’s just a simple fact that stocks are overvalued and the market will continue to correct downward, putting pressure on brokers’ earnings.

Don’t let the popular media fool you: Its bear market for big-cap and blue chips-stocks. And it’s been one since 2000.