This is The Wall Street Digest Hotline Update for Friday, September 5, 2008, at 6:00 p.m. EST.
Disappointing employment figures pushed stock prices down dramatically this morning. The financial sector rebounded in the afternoon and cut losses. At the closing bell, the Dow gained almost 33 points, closing at 11,220 while the Nasdaq fell 3 points, closing at 2,255. The S&P 500 closed 5 points higher at 1,242. Oil closed $1.66 lower at $106.23 per barrel, and gold closed $0.30 lower at $803.50 an ounce.
The unemployment rate inched up to 6.1 percent. Since January, 600,000 jobs have been lost. August auto sales were down again. GM fell 20.3 percent, Ford fell 26.5 percent Chrysler fell 34.5 percent, Honda fell 7.3 percent, and Toyota fell 9.4 percent. Nissan bucked the trend and gained 13.6 percent in August.
September is the worst month of the year for stock prices. I expect a sell-off in September because of adverse down-market cycles, which should bottom on or before October first. I see no reason to add positions to our portfolio until after the market bottom.
I would continue to avoid the money center banks, the brokerage and financial sectors, and the commodity area.
Home prices will continue to fall. I don't see a housing bottom until late 2009, at the earliest. The Fed must supply greater liquidity to the banking system. And Congress, sooner-or-later, will have to pass a deep tax cut to accelerate economic growth. That is a tall order with our do-nothing Congress.
I will continue to trim positions from our portfolio as needed. Stay close to our Tuesday/Friday Hotline Updates.
The next Hotline Update will be on Tuesday, September 9, 2008, at 6:00 p.m. EST.