Even Good Stocks Having a Rough Time

You know stock market sentiment is bad when continuous interest- rate reductions by the Federal Reserve don’t help at all. The central bank is still fighting the institutional credit crisis, and is widely expected to bring down interest rates again by another half a point next week.

Before the stock market correction began late last year, the central bank came quickly to the aid of the equity market (too quickly in my view) and investors voted their approval by buying stocks. Now, not even the biggest interest-rate reductions will generate a positive week in the stock market.

What’s also happening out there is that many companies are reporting very good financial results; in many cases, numbers that genuinely beat consensus estimates. Their stock prices are still going down because investor sentiment is so bad.

You’ve got all kinds of fast-growing Chinese companies out there that are continuing to drop in price, even though their numbers are coming in very strong. It’s a real signal in my mind of how weak the current state of the equity market is. This difficult environment is likely to last throughout the remainder of this year.

I thought that the Federal Reserve’s aggressive moves on interest rates would have had a bigger impact on the stock market than they have so far. Clearly, a lot of people have just withdrawn from participating in stocks. A lot of people are just focusing on the real estate market and the value of their homes.

Carl Icahn said on 60 Minutes that he is buying stock in this market. If you have the resources and the staying power, then why not? It’s difficult to estimate how long this weak stock market environment will last, but if the news has been bad over the last couple of months, just wait until first-quarter earnings season.