It looks to me that this is the end of the dead cat bounce and the beginning of a new downward trend for the broader market. The economic data that have coming out aren’t very good and the layoff notices are really piling up.
Really, the Bank of America layoffs are no big surprise. You’re not going to have a big bank takeover of Merrill Lynch and not have job losses. The bank noted that it plans to lay off people from all of its business lines, indicating just how bad times are now for the financial industry.
One bellwether stock that’s always worth following is United Technologies Corporation (NYSE/UTX). This huge conglomerate recently announced that, while its cash flow is looking solid for 2009, its revenue base is deteriorating.
General Electric Company (NYSE/GE) is also taking it on the chin. I can’t believe this stock is trading below $20.00 per share. Currently, it’s trading around $17.00 per share, and its 52-week low set in mid-November was $12.58 per share. This stock is now yielding well over six percent, and has corrected significantly from its 52-week high of over $38.00 per share. Obviously, the pain of the current correction is widespread throughout corporate America.
In the world of high technology, the once high-flying Google, Inc. (NASDAQ/GOOG) is trading below $300.00 per share. You could almost argue that this is a value stock at its current price.
I don’t know where the stock market is going to go over the coming months, but I think it’s very likely we’ll retest the lows set in mid-November. This is when the S&P 500 Index broke the 750- level, which is truly significant. I remember writing that if that index broke 1,200, we’d be in for some real trouble.
The opportunity for some great buys in the stock market is coming, but I think we’ll see the main stock market averages move much lower first. We’re still in a period of liquidation and a period where cash is king.