Dow Closes Above 10,000 for First Time in a Year | Online NewsHour | October 14, 2009 | PBS
FRANK AHRENS: Right. The market bottom really began in March 9, and it's
been the financials, the big banks, the Goldman Sachs, the J.P. Morgan
Chase, which reported third-quarter earnings today that really gave the Dow
that last sort of bump up above 10000 it needed today.
RAY SUAREZ: So, this is really about the financial industry, and not a broader
look at the American economy?
FRANK AHRENS: Yes, that's certainly what has led it.
And think of it this way. The financials were down so far, I mean, we were on
the edge of a financial abyss this time last year. And these financials, the
stock, A, was so low, so they had a long way to come back up. But, B,
they're a big beneficiary of the government bailout, billions and billions of
dollars.
So, in many ways, this has been a taxpayer-fueled rally, which is interesting,
because a lot of individual investors have stayed on the sidelines, because
they're wary of it, for good reason.
Now we have to look and see what third-quarter company earnings are going
to show us, whether this can be a self-sustaining recovery or if it's only
really kind of a Red Bull, sort of caffeinated recovery.
We always know that unemployment, which is near 10 percent now and
probably will crest somewhat higher than 10 percent -- and, also, don't think
it's going to start diving right back down. It will probably stay high for a
number of months -- we know that's what's called a lagging indicator,
meaning the stock market comes back first.
Companies feel a little bit better about things, they start hiring people,
unemployment goes down. That has been the same cycle we have seen for
each of the past recessions and recoveries.
What's different about this one,
this is the one that has been -- had a massive infusion of federal money,
taxpayer money, through the government.
And the key thing now is going to be managing the transition from sort of a
government-stimulated economy to a self-sustaining economy. So, in many
ways, this rally has been more of a traders rally than an investors rally. It's,
traders are playing price differences.
RAY SUAREZ: Now, at the same time as the market is -- the Dow index is
hitting 10000 again, the dollar is way down. As you mentioned,
unemployment is set to lag for some time.
And, just today, retail sales figures came out that showed a drop of 1.5
percent in September. So, the economy's still in pretty perilous shape, isn't it?
FRANK AHRENS: It's certainly wobbly. You need to go inside the numbers a
little bit. What's interesting about the September retail sales is, if you take
out autos from that, September retail sales actually bumped up a little bit.
And that's exactly the government's stimulus economy I'm talking about.
September retails, no cash for clunkers. That was over. And, so, auto sales
fell right back off the table. So, that's what we talk about moving from a
government-fueled economy into more of a self-sustaining, organic economy.
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